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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

|           |  |                                                                            
|---------- |  | ---------------------------------------------------------------------------
|(Mark One)
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
|           |  | ACT OF 1934                                                                

For the quarterly period ended September 30, 2003

OR

|     |  |                                                                             
|---- |  | ----------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
|     |  | ACT OF 1934                                                                 

For the transition period from  to 
Commission File Number 0-30791

eFunds Corporation

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 39-1506286                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

|                                         |  |           
|---------------------------------------- |  | ----------
|Gainey Center II                         |  |           
|8501 N. Scottsdale Road, Suite 300       |  |           
|Scottsdale, Arizona                      |  | 85253     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (480) 629-7700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [  ]

The number of shares outstanding of the registrants common stock, par value $.01 per share, at November 6, 2003 was 47,094,963



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|Index to Exhibits            
|EX-10.1                      
|EX-10.2                      
|EX-10.3                      
|EX-31.1                      
|EX-31.2                      
|EX-32.1                      



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |         |         |         | 
|--------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                                              |                                                                                                                                                                   |                           |                                            |         | (Unaudited)   |         |              |         |        
|                                              |                                                                                                                                                                   |                           |                                            |         | September 30, |         | December 31,
|(dollars in thousands)                        |                                                                                                                                                                   | 2003                      |                                            | 2002   
|                                              |                                                                                                                                                                   |                           |                                            |        
|Current assets:                               |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Cash and cash equivalents                                                                                                                                         |                           | $                                          | 172,121 |               |         | $            | 119,487 |        
|                                              | Deposits subject to compensating balance arrangements                                                                                                             |                           |                                            | 421     |               |         |              | 1,133   |        
|                                              | Restricted custodial cash                                                                                                                                         |                           |                                            | 1,082   |               |         |              | 3,046   |        
|                                              | Accounts receivable  net                                                                                                                                         |                           |                                            | 58,544  |               |         |              | 59,311  |        
|                                              | Deferred income taxes                                                                                                                                             |                           |                                            | 11,375  |               |         |              | 11,580  |        
|                                              | Prepaid expenses and other current assets                                                                                                                         |                           |                                            | 12,020  |               |         |              | 17,865  |        
|                                              | Assets held for sale                                                                                                                                              |                           |                                            | 1,372   |               |         |              | 13,310  |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   | Total current assets      |                                            |         | 256,935       |         |              |         | 225,732 |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|Property and equipment  net                  |                                                                                                                                                                   |                           | 49,704                                     |         |               |         | 50,764       |        
|Long-term investments                         |                                                                                                                                                                   |                           | 2,556                                      |         |               |         | 3,758        |        
|Intangibles:                                  |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Goodwill                                                                                                                                                          |                           |                                            | 116,254 |               |         |              | 114,036 |        
|                                              | Other intangible assets  net                                                                                                                                     |                           |                                            | 59,168  |               |         |              | 61,836  |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Total intangibles  net                                                                                                                                           |                           |                                            | 175,422 |               |         |              | 175,872 |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|Other non-current assets                      |                                                                                                                                                                   |                           | 3,015                                      |         |               |         | 3,292        |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   | Total non-current assets  |                                            |         | 230,697       |         |              |         | 233,686 |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   |                           | Total assets                               |         | $             | 487,632 |              |         | $       | 459,418 | 
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|Current liabilities:                          |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Accounts payable                                                                                                                                                  |                           | $                                          | 22,027  |               |         | $            | 33,074  |        
|                                              | Accrued liabilities                                                                                                                                               |                           |                                            | 47,595  |               |         |              | 30,461  |        
|                                              | Accrued contract losses                                                                                                                                           |                           |                                            | 3,162   |               |         |              | 7,578   |        
|                                              | Deferred revenue                                                                                                                                                  |                           |                                            | 6,456   |               |         |              | 3,423   |        
|                                              | Long-term debt due within one year                                                                                                                                |                           |                                            | 6,986   |               |         |              | 1,401   |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   | Total current liabilities |                                            |         | 86,226        |         |              |         | 75,937  |        
|Long-term debt                                |                                                                                                                                                                   |                           | 1,525                                      |         |               |         | 1,338        |        
|Deferred income taxes                         |                                                                                                                                                                   |                           | 9,185                                      |         |               |         | 9,202        |        
|Other long-term liabilities                   |                                                                                                                                                                   |                           | 4,568                                      |         |               |         | 9,421        |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Total liabilities                                                                                                                                                 |                           |                                            | 101,504 |               |         |              | 95,898  |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|Commitments and contingencies (Notes 10 & 11) |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|Stockholders equity:                         |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              | Preferred stock $.01 par value; 100,000,000 shares authorized; no shares
issued and outstanding                                                                   |                           |                                            |        |               |         |              |        |        
|                                              | Common stock $.01 par value (authorized: 250,000,000 shares; issued and
outstanding: 46,969,535 shares at September 30, 2003 and 46,702,496 at
December 31, 2002) |                           |                                            | 470     |               |         |              | 467     |        
|                                              | Additional paid-in capital                                                                                                                                        |                           |                                            | 413,602 |               |         |              | 411,451 |        
|                                              | Accumulated deficit                                                                                                                                               |                           |                                            | (27,678 | )             |         |              | (46,495 | )      
|                                              | Accumulated other comprehensive loss                                                                                                                              |                           |                                            | (266    | )             |         |              | (1,903  | )      
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   | Stockholders equity      |                                            |         | 386,128       |         |              |         | 363,520 |        
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        
|                                              |                                                                                                                                                                   |                           | Total liabilities and stockholders equity |         | $             | 487,632 |              |         | $       | 459,418 | 
|                                              |                                                                                                                                                                   |                           |                                            |         |               |         |              |        

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |         |         |        | 
|----------------------------------------------------------------- | -------------------------------------------- | ------------------------ | -------------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | 
|                                                                  |                                              |                          |                            |        | Three Months Ended |        | Nine Months Ended
|                                                                  |                                              |                          |                            |        | September 30,      |        | September 30,    
|                                                                  |                                              |                          |                            |        |                    |        |                  
|(in thousands, except per share amounts)                          |                                              | 2003                     |                            | 2002   |                    | 2003   |                   | 2002  
|                                                                  |                                              |                          |                            |        |                    |        |                   |       
|Net revenue                                                       |                                              | $                        | 133,141                    |        |                    | $      | 143,995           |        |         | $      | 396,625 |         |         | $      | 411,463 |        
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|Operating expenses:                                               |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|                                                                  | Processing, communication, and service costs |                          |                            | 58,037 |                    |        |                   | 63,041 |         |        |         | 173,682 |         |        |         | 166,939 |        
|                                                                  | Employee costs                               |                          |                            | 44,391 |                    |        |                   | 42,658 |         |        |         | 136,404 |         |        |         | 139,375 |        
|                                                                  | Depreciation and amortization                |                          |                            | 8,424  |                    |        |                   | 9,083  |         |        |         | 26,047  |         |        |         | 28,326  |        
|                                                                  | Other operating costs                        |                          |                            | 9,714  |                    |        |                   | 9,644  |         |        |         | 34,426  |         |        |         | 28,837  |        
|                                                                  | Restructuring and asset impairment charges   |                          |                            | 2,645  |                    |        |                   | 6,079  |         |        |         | 2,645   |         |        |         | 16,525  |        
|                                                                  | Reversal of provision for contract losses    |                          |                            | (2,250 | )                  |        |                   | (2,000 | )       |        |         | (2,250  | )       |        |         | (2,000  | )      
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|                                                                  |                                              | Total operating expenses |                            |        | 120,961            |        |                   |        | 128,505 |        |         |         | 370,954 |        |         |         | 378,002 |       
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|                                                                  |                                              |                          | Income from operations     |        |                    | 12,180 |                   |        |         | 15,490 |         |         |         | 25,671 |         |         |         | 33,461 | 
|Other income (expense)  net                                      |                                              |                          | (915                       | )      |                    |        | (233              | )      |         |        | (55     | )       |         |        | 372     |        
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|                                                                  |                                              |                          | Income before income taxes |        |                    | 11,265 |                   |        |         | 15,257 |         |         |         | 25,616 |         |         |         | 33,833 | 
|Provision for income taxes                                        |                                              |                          | (2,193                     | )      |                    |        | (4,586            | )      |         |        | (6,799  | )       |         |        | (10,160 | )      
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|                                                                  |                                              |                          | Net income                 |        | $                  | 9,072  |                   |        | $       | 10,671 |         |         | $       | 18,817 |         |         | $       | 23,673 | 
|                                                                  |                                              |                          |                            |        |                    |        |                   |        |         |        |         |         |         |        |         |        
|Weighted average shares outstanding                               |                                              |                          | 46,848                     |        |                    |        | 46,630            |        |         |        | 46,769  |         |         |        | 46,561  |        
|Weighted average shares and potential dilutive shares outstanding |                                              |                          | 47,442                     |        |                    |        | 46,644            |        |         |        | 47,006  |         |         |        | 46,861  |        
|Net income per share  basic                                      |                                              | $                        | 0.19                       |        |                    | $      | 0.23              |        |         | $      | 0.40    |         |         | $      | 0.51    |        
|Net income per share  diluted                                    |                                              | $                        | 0.19                       |        |                    | $      | 0.23              |        |         | $      | 0.40    |         |         | $      | 0.51    |        

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |         |   |        |         |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ---- | -------------------------------------------------- | ----------------------------------------- | - | ----------------- | ------- | ------- | - | ------ | ------- | -
|                                                 |                                                                                   |      |                                                    |                                           |   | Nine Months Ended
|                                                 |                                                                                   |      |                                                    |                                           |   | September 30,    
|                                                 |                                                                                   |      |                                                    |                                           |   |                  
|(in thousands)                                   |                                                                                   | 2003 |                                                    | 2002                                     
|                                                 |                                                                                   |      |                                                    |                                          
|Cash flows from operating activities:            |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 | Net income                                                                        |      | $                                                  | 18,817                                    |   |                   | $       | 23,673  |  
|                                                 | Adjustments to reconcile net income to net cash
provided by operating activities: |      |                                                    |                                           |   |                   |         |         |  
|                                                 |                                                                                   |      | Depreciation                                       |                                           |   | 10,917            |         |         |   | 13,918 |        
|                                                 |                                                                                   |      | Amortization of intangibles                        |                                           |   | 15,130            |         |         |   | 14,408 |        
|                                                 |                                                                                   |      | Loss on impairment or disposals of assets          |                                           |   | 1,637             |         |         |   | 8,249  |        
|                                                 |                                                                                   |      | Deferred income taxes                              |                                           |   | 188               |         |         |   | 2,417  |        
|                                                 |                                                                                   |      | Changes in assets and liabilities:                 |                                           |   |                   |         |         |   |        |        
|                                                 |                                                                                   |      |                                                    | Restricted custodial cash                 |   |                   | 1,964   |         |   |        | (5,444  | )
|                                                 |                                                                                   |      |                                                    | Accounts receivable                       |   |                   | 767     |         |   |        | 9,235   |  
|                                                 |                                                                                   |      |                                                    | Accounts payable                          |   |                   | (11,047 | )       |   |        | 9,487   |  
|                                                 |                                                                                   |      |                                                    | Accrued contract losses                   |   |                   | (4,416  | )       |   |        | (6,307  | )
|                                                 |                                                                                   |      |                                                    | Deferred revenue                          |   |                   | 3,033   |         |   |        | (7,498  | )
|                                                 |                                                                                   |      |                                                    | Other assets and liabilities              |   |                   | 20,326  |         |   |        | (4,733  | )
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 |                                                                                   |      |                                                    | Net cash provided by operating activities |   |                   | 57,316  |         |   |        | 57,405  |  
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|Cash flows from investing activities:            |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 | Capital expenditures                                                              |      |                                                    | (15,133                                   | ) |                   |         | (17,805 | )
|                                                 | Acquisitions, including contingent consideration                                  |      |                                                    | (2,218                                    | ) |                   |         | (35,184 | )
|                                                 | Proceeds from sale of property and equipment                                      |      |                                                    | 11,938                                    |   |                   |         |        |  
|                                                 | Other                                                                             |      |                                                    |                                          |   |                   |         | 141     |  
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 |                                                                                   |      |                                                    | Net cash used in investing activities     |   |                   | (5,413  | )       |   |        | (52,848 | )
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|Cash flows from financing activities:            |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 | Payments on long-term debt                                                        |      |                                                    | (1,220                                    | ) |                   |         | (2,298  | )
|                                                 | Issuance of common stock                                                          |      |                                                    | 1,951                                     |   |                   |         | 2,774   |  
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 |                                                                                   |      |                                                    | Net cash provided by financing activities |   |                   | 731     |         |   |        | 476     |  
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|Net increase in cash and cash equivalents        |                                                                                   |      | 52,634                                             |                                           |   |                   | 5,033   |        
|Cash and cash equivalents at beginning of period |                                                                                   |      | 119,487                                            |                                           |   |                   | 101,871 |        
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|Cash and cash equivalents at end of period       |                                                                                   | $    | 172,121                                            |                                           |   | $                 | 106,904 |        
|                                                 |                                                                                   |      |                                                    |                                           |   |                   |         |        
|Supplemental disclosures:                        |                                                                                   |      |                                                    |                                           |   |                   |         |        
|                                                 | Cash paid for income taxes                                                        |      | $                                                  | 1,333                                     |   |                   | $       | 3,876   |  
|                                                 | Noncash investing and financing activities:                                       |      |                                                    |                                           |   |                   |         |         |  
|                                                 |                                                                                   |      | Purchase of assets under capital lease obligations |                                           | $ | 5,795             |         |         | $ |       |        

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

eFunds Corporation and its wholly-owned subsidiaries (the Company) provide
transaction processing, risk management and professional services to financial
institutions, retailers, electronic funds transfer networks and government
agencies. The Company has four operating segments: Electronic Payments;
Automated Teller Machine (ATM) Management; Risk Management; and Global
Outsourcing. The Electronic Payments segment provides electronic funds transfer
(EFT) software, software applications development, maintenance and
installation, EFT processing services, including automated clearinghouse (ACH)
processing as well as electronic benefit transfer (EBT) services for government
agencies. The ATM Management segment provides ATM deployment, management and
branding services. The Risk Management segment provides risk management based
data and other products to financial institutions, retailers and other
businesses that assist in detecting fraud and assessing the risk of opening a
new account or accepting a check. The Global Outsourcing segment provides
information technology services and business process outsourcing services.

The unaudited condensed consolidated financial statements of the Company for
the three and nine month periods ended September 30, 2003 and 2002 have been
prepared in accordance with accounting principles generally accepted in the
United States of America and with the instructions to Form 10-Q and Article 10
of Regulation S-X. All material intercompany accounts and transactions have
been eliminated. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Interim results are not necessarily indicative of results for a
full year. Certain amounts in prior periods have been reclassified to conform
to the current period presentation. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 2002 included in
the Companys 2002 Annual Report on Form 10-K filed with the Securities and
Exchange Commission (SEC).

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES:

New Accounting Pronouncements

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF
Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or
rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
adoption of EITF Issue No. 00-21 did not have a material effect on the
Companys consolidated financial position or results of operations.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial
Statements. Interpretation No. 46 prescribes how to identify variable interest
entities and how an enterprise assesses its interests in a variable interest
entity to decide whether to consolidate that entity. This interpretation
requires existing unconsolidated variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse
risks among the parties involved. Interpretation No. 46 is effective
immediately for variable interest entities created after January 31, 2003 and
to variable interest entities in which an enterprise obtains an interest after
that date. The interpretation applies in the first fiscal year or interim
period beginning after December 15, 2003 to variable interest entities in which
an enterprise holds a variable interest that it acquired before February 1,
2003. The Company does not believe the adoption of Interpretation No. 46 will
have a material impact on its financial position or results of operations.

Employee Stock-Based Compensation

Until 2000, the Companys employees participated in the stock incentive program
of Deluxe Corporation, its former parent company. In connection with the
Companys initial public offering and its subsequent spin-off from Deluxe, the
Company adopted new stock incentive programs for the benefit of its employees.
The Company accounts for those plans using the intrinsic value method
prescribed by Accounting Principles Board (APB) Opinion No. 25,

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Accounting for Stock Issued to Employees, and related interpretations. No
stock-based employee compensation cost for options granted under those plans is
reflected in net income, as all of these options had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provision of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to its stock-based employee compensation.

|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |      | 
|------------------------------------------------------------------------------------------------------------------- | ------------------- | ---- | ------------------ | ---- | ----------------- | ---- | ------ | ---- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                    |                     |      | Three Months Ended |      | Nine Months Ended
|                                                                                                                    |                     |      | September 30,      |      | September 30,    
|                                                                                                                    |                     |      |                    |      |                  
|(in thousands, except per share amounts)                                                                            |                     | 2003 |                    | 2002 |                   | 2003 |        | 2002
|                                                                                                                    |                     |      |                    |      |                   |      |        |     
|Net income, as reported                                                                                             |                     | $    | 9,072              |      |                   | $    | 10,671 |      |  | $ | 18,817 |      |  | $ | 23,673 |     
|Total stock-based employee compensation
expense determined under fair value
based method for all awards, net of tax |                     |      | (719               | )    |                   |      | (980   | )    |  |   | (2,011 | )    |  |   | (4,450 | )   
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|Pro forma net income                                                                                                |                     | $    | 8,353              |      |                   | $    | 9,691  |      |  | $ | 16,806 |      |  | $ | 19,223 |     
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|Earnings per share:                                                                                                 |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|                                                                                                                    | Basic-as reported   |      | $                  | 0.19 |                   |      | $      | 0.23 |  |   | $      | 0.40 |  |   | $      | 0.51 | 
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|                                                                                                                    | Basic-pro forma     |      | $                  | 0.18 |                   |      | $      | 0.21 |  |   | $      | 0.36 |  |   | $      | 0.41 | 
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|                                                                                                                    | Diluted-as reported |      | $                  | 0.19 |                   |      | $      | 0.23 |  |   | $      | 0.40 |  |   | $      | 0.51 | 
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     
|                                                                                                                    | Diluted-pro forma   |      | $                  | 0.18 |                   |      | $      | 0.21 |  |   | $      | 0.36 |  |   | $      | 0.41 | 
|                                                                                                                    |                     |      |                    |      |                   |      |        |      |  |   |        |      |  |   |        |     

For purposes of applying SFAS No. 123, the weighted average estimated fair
value of stock options granted during the three and nine month periods ended
September 30, 2003 was $5.11 and $3.82, respectively, and $4.72 and $6.07 for
the same periods in 2002. This value was estimated at the option grant date
using a Black-Scholes option-pricing model.

NOTE 3  INTANGIBLES:

Intangible assets consist primarily of goodwill, capitalized software costs and
acquired contracts. Other intangible assets, both acquired and developed,
subject to amortization were as follows:

|                       |  |           |      |          |  |                    |         |                   |  |         |          |              |  |             |        |  |  |   |         |  |  |   |          |   |  |   |        | 
|---------------------- |  | --------- | ---- | -------- |  | ------------------ | ------- | ----------------- |  | ------- | -------- | ------------ |  | ----------- | ------ |  |  | - | ------- |  |  | - | -------- | - |  | - | ------ | 
|                       |  |           |      |          |  | September 30, 2003 |         | December 31, 2002
|                       |  | Wtd. Avg. |      |          |  |                   
|                       |  | Amort.    |      | Gross    |  |                    |         |                   |  |         |          |              |  | Gross       |        |  |  |   |         |  |  |  
|                       |  | Period    |      | Carrying |  | Accumulated        |         |                   |  |         |          | Carrying     |  | Accumulated |        |  |  |  
|(dollars in thousands) |  | In Years  |      | Amounts  |  | Amortization       |         | Net               |  | Amounts |          | Amortization |  | Net        
|                       |  |           |      |          |  |                    |         |                   |  |         |          |              |  |            
|Software-internal use  |  |           | 3.8  |          |  | $                  | 79,264  |                   |  | $       | (49,361  | )            |  | $           | 29,903 |  |  | $ | 69,111  |  |  | $ | (39,672  | ) |  | $ | 29,439 | 
|Acquired contracts     |  |           | 13.8 |          |  |                    | 22,263  |                   |  |         | (3,099   | )            |  |             | 19,164 |  |  |   | 22,262  |  |  |   | (1,455   | ) |  |   | 20,807 | 
|Other                  |  |           | 4.8  |          |  |                    | 75,404  |                   |  |         | (65,303  | )            |  |             | 10,101 |  |  |   | 73,353  |  |  |   | (61,763  | ) |  |   | 11,590 | 
|                       |  |           |      |          |  |                    |         |                   |  |         |          |              |  |             |        |  |  |   |         |  |  |   |          |   |  |   |        | 
|                       |  |           |      |          |  | $                  | 176,931 |                   |  | $       | (117,763 | )            |  | $           | 59,168 |  |  | $ | 164,726 |  |  | $ | (102,890 | ) |  | $ | 61,836 | 
|                       |  |           |      |          |  |                    |         |                   |  |         |          |              |  |             |        |  |  |   |         |  |  |   |          |   |  |   |        | 

For the three and nine month periods ended September 30, 2003, amortization
expense for intangible assets was $4.9 million and $15.1 million, respectively,
and $4.7 million and $14.4 million for the three and nine month periods ended
September 30, 2002, respectively. The estimated annual amortization expense for
intangible assets held at September 30, 2003 is $17 million, $12 million, $7
million and $4 million for the years 2004, 2005, 2006 and 2007, respectively,
and the estimated amortization for the remaining three months of 2003 is $4
million.

The change in the carrying amount of goodwill for the nine months ended
September 30, 2003 is as follows:

|                                 |  |            |       |            |  |            |        |             |  |       |       |       |  |   |        |  |  |   |        |  |  |   |         | 
|-------------------------------- |  | ---------- | ----- | ---------- |  | ---------- | ------ | ----------- |  | ----- | ----- | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                 |  | Electronic |       | ATM        |  | Risk       |        | Global      |  |       |       |       |  |   |        | 
|(in thousands)                   |  | Payments   |       | Management |  | Management |        | Outsourcing |  | Other |       | Total
|                                 |  |            |       |            |  |            |        |             |  |       |       |      
|Balance as of December 31, 2002  |  | $          | 1,600 |            |  | $          | 75,547 |             |  | $     | 5,724 |       |  | $ | 20,559 |  |  | $ | 10,606 |  |  | $ | 114,036 | 
|Contingent consideration         |  |            |      |            |  |            | 2,218  |             |  |       |      |       |  |   |       |  |  |   |       |  |  |   | 2,218   | 
|                                 |  |            |       |            |  |            |        |             |  |       |       |       |  |   |        |  |  |   |        |  |  |   |         | 
|Balance as of September 30, 2003 |  | $          | 1,600 |            |  | $          | 77,765 |             |  | $     | 5,724 |       |  | $ | 20,559 |  |  | $ | 10,606 |  |  | $ | 116,254 | 
|                                 |  |            |       |            |  |            |        |             |  |       |       |       |  |   |        |  |  |   |        |  |  |   |         | 

NOTE 4  RESTRUCTURING AND ASSET IMPAIRMENT CHARGES:

Long-lived assets held for sale

During the third quarter of 2002, the Company undertook to sell certain
facilities in Glendale, Wisconsin, and Runcorn, UK. At that time, pursuant to
SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, the Company
recorded a $3 million asset write-down to reflect the property and equipment at
Glendale held for sale at

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its estimated fair value, less selling costs. During the first quarter of
2003, the Glendale facility was sold for net proceeds of approximately $12
million. The Company also entered into an agreement with the buyer for a
short-term leaseback. The gain of approximately $0.6 million from this sale is
being amortized over the term of the leaseback.

Restructuring accruals

During the first nine months of 2002, the Company recorded restructuring and
asset impairment charges of $4.5 million for severance benefits, $6.9 million
for lease-related costs as a result of the consolidation of facilities, a net
charge of $2.1 million related to software impairment and other charges and the
$3 million asset write-down described above. During the third quarter of 2003,
the Company recorded restructuring charges of $3.5 million for severance
benefits related to business process improvement initiatives and reversed $0.9
million of lease related reserves to reflect the subleasing of the relevant
properties. The accrual for severance benefits was made in accordance with the
Companys established severance plan. The following table summarizes the
change in the Companys restructuring accruals for the nine month period ended
September 30, 2003, including the long-term portion of approximately $2.1
million at September 30, 2003:

|                                    |  |           |        |         |  |               |       |   |  |   |        |  
|----------------------------------- |  | --------- | ------ | ------- |  | ------------- | ----- | - |  | - | ------ | -
|                                    |  |           |        |         |  | Lease-Related |       |   |  |  
|                                    |  | Severance |        | Costs   |  |               |       |  
|(in thousands)                      |  | Related   |        | & Other |  | Total        
|                                    |  |           |        |         |  |              
|Balance at December 31, 2002        |  | $         | 1,798  |         |  | $             | 5,187 |   |  | $ | 6,985  |  
|Cash payments                       |  |           | (338   | )       |  |               | (793  | ) |  |   | (1,131 | )
|                                    |  |           |        |         |  |               |       |   |  |   |        |  
|Balance at March 31, 2003           |  |           | 1,460  |         |  |               | 4,394 |   |  |   | 5,854  |  
|Cash payments                       |  |           | (611   | )       |  |               | (259  | ) |  |   | (870   | )
|                                    |  |           |        |         |  |               |       |   |  |   |        |  
|Balance at June 30, 2003            |  |           | 849    |         |  |               | 4,135 |   |  |   | 4,984  |  
|Reversal of lease-related provision |  |           |       |         |  |               | (854  | ) |  |   | (854   | )
|Expense provision                   |  |           | 3,499  |         |  |               |      |   |  |   | 3,499  |  
|Cash payments                       |  |           | (1,135 | )       |  |               | (248  | ) |  |   | (1,383 | )
|                                    |  |           |        |         |  |               |       |   |  |   |        |  
|Balance at September 30, 2003       |  | $         | 3,213  |         |  | $             | 3,033 |   |  | $ | 6,246  |  
|                                    |  |           |        |         |  |               |       |   |  |   |        |  

NOTE 5  ACCRUED CONTRACT LOSSES:

The Companys accrued contract losses pertain to long-term service contracts
with government agencies for transaction processing in the electronic payments
segment. In the third quarter of 2003, the Company recorded a $2.3 million
benefit related to a reduction in the estimate of future losses on certain
government EBT contracts. A similar benefit of $2.0 million was taken in the
third quarter of 2002. The following table summarizes the activity of the
Companys accrued contract loss reserve:

|                                          |  |      |        |      |  |   |        |  
|----------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(in thousands)                            |  | 2003 |        | 2002
|                                          |  |      |        |     
|Balance at January 1                      |  | $    | 7,578  |      |  | $ | 14,777 |  
|Charges to loss reserve                   |  |      | (1,003 | )    |  |   | (1,208 | )
|                                          |  |      |        |      |  |   |        |  
|Balance at March 31                       |  |      | 6,575  |      |  |   | 13,569 |  
|Charges to loss reserve                   |  |      | (917   | )    |  |   | (938   | )
|Cash payments                             |  |      |       |      |  |   | (1,000 | )
|                                          |  |      |        |      |  |   |        |  
|Balance at June 30                        |  |      | 5,658  |      |  |   | 11,631 |  
|Charges to loss reserve                   |  |      | (246   | )    |  |   | (1,161 | )
|Reversal of provision for contract losses |  |      | (2,250 | )    |  |   | (2,000 | )
|                                          |  |      |        |      |  |   |        |  
|Balance at September 30                   |  | $    | 3,162  |      |  | $ | 8,470  |  
|                                          |  |      |        |      |  |   |        |  

NOTE 6  LONG-TERM DEBT:
Long-term debt was as follows:

|                                |       |      |               |       |              |   |        |       | 
|------------------------------- | ----- | ---- | ------------- | ----- | ------------ | - | ------ | ----- | 
|                                |       |      | September 30, |       | December 31,
|(in thousands)                  |       | 2003 |               | 2002 
|                                |       |      |               |      
|Capital leases and other        |       | $    | 8,511         |       |              | $ | 2,739  |      
|Less amount due within one year |       |      | (6,986        | )     |              |   | (1,401 | )    
|                                |       |      |               |       |              |   |        |      
|                                | Total |      | $             | 1,525 |              |   | $      | 1,338 | 
|                                |       |      |               |       |              |   |        |      

Long-term debt consists principally of capital lease obligations related to
purchased software and equipment. The average interest rate on capital lease
obligations is approximately 4%. Carrying value approximates fair value for
these obligations, which are due through the year 2007. During the third
quarter of 2003 the Company entered into a twelve-month capital lease for
approximately $5 million of system software.

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NOTE 7  INCOME PER SHARE:

The following table reflects the calculation of basic and diluted income per
share:

|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |        |        | 
|---------------------------------------- | ----------------------------------- | ----------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------ | ------ |  |  | ------ | ------ |  |  | ------ | ------ | 
|                                         |                                     |                                                                   |  | Three Months Ended |        | Nine Months Ended
|                                         |                                     |                                                                   |  | September 30,      |        | September 30,    
|                                         |                                     |                                                                   |  |                    |        |                  
|(in thousands, except per share amounts) |                                     | 2003                                                              |  | 2002               |        | 2003              |  | 2002  
|                                         |                                     |                                                                   |  |                    |        |                   |  |       
|Net income per share  basic             |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         |                                     | Net income                                                        |  | $                  | 9,072  |                   |  | $      | 10,671 |  |  | $      | 18,817 |  |  | $      | 23,673 | 
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         | Weighted average shares outstanding |                                                                   |  | 46,848             |        |                   |  | 46,630 |        |  |  | 46,769 |        |  |  | 46,561 |       
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         |                                     | Net income per share  basic                                      |  | $                  | 0.19   |                   |  | $      | 0.23   |  |  | $      | 0.40   |  |  | $      | 0.51   | 
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |        |        | 
|Net income per share  diluted           |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         |                                     | Net income                                                        |  | $                  | 9,072  |                   |  | $      | 10,671 |  |  | $      | 18,817 |  |  | $      | 23,673 | 
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |        |        | 
|                                         |                                     | Weighted average shares outstanding                               |  |                    | 46,848 |                   |  |        | 46,630 |  |  |        | 46,769 |  |  |        | 46,561 | 
|                                         | Dilutive impact of options          |                                                                   |  | 594                |        |                   |  | 14     |        |  |  | 237    |        |  |  | 300    |       
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         |                                     | Weighted average shares and potential dilutive shares outstanding |  |                    | 47,442 |                   |  |        | 46,644 |  |  |        | 47,006 |  |  |        | 46,861 | 
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |       
|                                         |                                     | Net income per share  diluted                                    |  | $                  | 0.19   |                   |  | $      | 0.23   |  |  | $      | 0.40   |  |  | $      | 0.51   | 
|                                         |                                     |                                                                   |  |                    |        |                   |  |        |        |  |  |        |        |  |  |        |        | 

NOTE 8  COMPREHENSIVE INCOME:

The Companys total comprehensive income for the three month periods ended
September 30, 2003 and 2002 was $9.6 million and $11.0 million, respectively,
and was $20.5 million and $23.8 million for the nine months ended September 30,
2003 and 2002, respectively. The Companys total comprehensive income consists
of net income and foreign currency translation adjustments.

NOTE 9  BUSINESS SEGMENT INFORMATION:

The Companys segment reporting was revised during the second quarter of 2003
to reflect organizational changes and the additional allocation of overhead to
the business segments. To facilitate the delivery of a full range of
processing solutions from software licensing through outsourced processing, the
Company now manages its EFT software sales in its Electronic Payments segment.
This service was previously managed under its Professional Services segment.
Collection activities, which were formerly managed under the Companys Risk
Management segment, and account verification services, which were previously
managed under the Companys Electronic Payments segment, are both now under the
executive leadership of its Global Outsourcing segment. Currently, the
Companys business segments are: Electronic Payments; ATM Management; Risk
Management; and Global Outsourcing. The Company reports segment information
consistent with the way management internally disaggregates its operations to
assess performance and to allocate resources. The Electronic Payments segment
provides EFT software sales, ACH, EFT and other processing services as well as
EBT services for government agencies. The ATM Management segment provides ATM
deployment, management and branding services. The Risk Management segment
provides risk management based data and other products to financial
institutions, retailers and other businesses that assist in detecting fraud and
assessing the risk of opening a new account or accepting a check. The Global
Outsourcing segment provides information technologies services and business
process outsourcing services.

The accounting policies of the segments are the same as those applied by the
Company on a consolidated basis. For internal reporting purposes, the Company
aggregates costs based upon managerial control. The majority of these managed
cost groups are directly assigned to a reportable segment. For cost groups
supporting more than one reportable segment, the costs are assigned based upon
the product line or project benefited. The assignment of costs is based upon
estimates of factors considered most appropriate for the cost group such as
transactions, calls, customers, square footage, revenues and headcount. The
Company does not allocate expenses that benefit all segments and are corporate
or administrative in nature. These costs include, among other things, executive
leadership costs, investor relations and general legal, consulting, accounting
and finance costs.

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##### Table of Contents



Information concerning operations in the Companys reportable segments is as
follows:

|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------- | ------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------- | ----------------- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                                                                                  |                     |                                                                                                                                        |   | Three Months Ended |         | Nine Months Ended
|                                                                                                                                  |                     |                                                                                                                                        |   | September 30,      |         | September 30,    
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                  
|(in thousands)                                                                                                                    |                     | 2003                                                                                                                                   |   | 2002               |         | 2003              |   | 2002   
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |        
|Net revenue:                                                                                                                      |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  | Electronic payments |                                                                                                                                        | $ | 45,210             |         |                   | $ | 53,229  |         |  | $ | 133,770 |         |  | $ | 162,981 |        
|                                                                                                                                  | ATM management      |                                                                                                                                        |   | 36,186             |         |                   |   | 34,940  |         |  |   | 106,359 |         |  |   | 83,090  |        
|                                                                                                                                  | Risk management     |                                                                                                                                        |   | 34,565             |         |                   |   | 33,758  |         |  |   | 100,460 |         |  |   | 99,188  |        
|                                                                                                                                  | Global outsourcing  |                                                                                                                                        |   | 17,180             |         |                   |   | 22,068  |         |  |   | 56,036  |         |  |   | 66,204  |        
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  |                     | Total net revenue                                                                                                                      |   |                    | 133,141 |                   |   |         | 143,995 |  |   |         | 396,625 |  |   |         | 411,463 | 
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|Operating expenses before
overhead, restructuring and
asset impairment charges, net
of reversal of provision for
contract losses: |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  | Electronic payments |                                                                                                                                        |   | 32,662             |         |                   |   | 31,895  |         |  |   | 96,515  |         |  |   | 100,372 |        
|                                                                                                                                  | ATM management      |                                                                                                                                        |   | 33,784             |         |                   |   | 33,785  |         |  |   | 99,966  |         |  |   | 80,335  |        
|                                                                                                                                  | Risk management     |                                                                                                                                        |   | 21,228             |         |                   |   | 24,170  |         |  |   | 64,644  |         |  |   | 75,837  |        
|                                                                                                                                  | Global outsourcing  |                                                                                                                                        |   | 14,938             |         |                   |   | 15,812  |         |  |   | 48,678  |         |  |   | 47,581  |        
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  |                     | Total operating expenses
before overhead,
restructuring and asset
impairment charges, net of
reversal of provision for
contract losses |   |                    | 102,612 |                   |   |         | 105,662 |  |   |         | 309,803 |  |   |         | 304,125 | 
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |         |        
|Allocated overhead:                                                                                                               |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  | Electronic payments |                                                                                                                                        |   | 2,260              |         |                   |   | 2,337   |         |  |   | 7,674   |         |  |   | 7,287   |        
|                                                                                                                                  | ATM management      |                                                                                                                                        |   | 1,752              |         |                   |   | 1,443   |         |  |   | 5,600   |         |  |   | 4,378   |        
|                                                                                                                                  | Risk management     |                                                                                                                                        |   | 2,417              |         |                   |   | 2,268   |         |  |   | 7,666   |         |  |   | 6,764   |        
|                                                                                                                                  | Global outsourcing  |                                                                                                                                        |   | 1,908              |         |                   |   | 1,894   |         |  |   | 6,107   |         |  |   | 5,715   |        
|                                                                                                                                  | Corporate           |                                                                                                                                        |   | 9,617              |         |                   |   | 10,822  |         |  |   | 33,709  |         |  |   | 35,208  |        
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  |                     | Total allocated overhead                                                                                                               |   |                    | 17,954  |                   |   |         | 18,764  |  |   |         | 60,756  |  |   |         | 59,352  | 
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|Restructuring and asset
impairment charges, net of
reversal of provision for
contract losses:                                     |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  | Electronic payments |                                                                                                                                        |   | (1,271             | )       |                   |   | (1,125  | )       |  |   | (1,271  | )       |  |   | 1,369   |        
|                                                                                                                                  | ATM management      |                                                                                                                                        |   | 244                |         |                   |   | 24      |         |  |   | 244     |         |  |   | 82      |        
|                                                                                                                                  | Risk management     |                                                                                                                                        |   | 884                |         |                   |   | 734     |         |  |   | 884     |         |  |   | 4,998   |        
|                                                                                                                                  | Global outsourcing  |                                                                                                                                        |   | 842                |         |                   |   | 495     |         |  |   | 842     |         |  |   | 1,216   |        
|                                                                                                                                  | Corporate           |                                                                                                                                        |   | (304               | )       |                   |   | 3,951   |         |  |   | (304    | )       |  |   | 6,860   |        
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  |                     | Total restructuring and
asset impairment charges,
net of reversal of
provision for contract
losses                                     |   |                    | 395     |                   |   |         | 4,079   |  |   |         | 395     |  |   |         | 14,525  | 
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |         |        
|Income (loss) from operations:                                                                                                    |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  | Electronic payments |                                                                                                                                        |   | 11,559             |         |                   |   | 20,122  |         |  |   | 30,852  |         |  |   | 53,953  |        
|                                                                                                                                  | ATM management      |                                                                                                                                        |   | 406                |         |                   |   | (312    | )       |  |   | 549     |         |  |   | (1,705  | )      
|                                                                                                                                  | Risk management     |                                                                                                                                        |   | 10,036             |         |                   |   | 6,586   |         |  |   | 27,266  |         |  |   | 11,589  |        
|                                                                                                                                  | Global outsourcing  |                                                                                                                                        |   | (508               | )       |                   |   | 3,867   |         |  |   | 409     |         |  |   | 11,692  |        
|                                                                                                                                  | Corporate           |                                                                                                                                        |   | (9,313             | )       |                   |   | (14,773 | )       |  |   | (33,405 | )       |  |   | (42,068 | )      
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        
|                                                                                                                                  |                     | Income from operations                                                                                                                 |   | $                  | 12,180  |                   |   | $       | 15,490  |  |   | $       | 25,671  |  |   | $       | 33,461  | 
|                                                                                                                                  |                     |                                                                                                                                        |   |                    |         |                   |   |         |         |  |   |         |         |  |   |        

The Company has not disclosed assets, interest income, interest expense or
income taxes by segment because this information is not reviewed by the chief
operating decision maker, produced internally nor practicable to prepare.
Depreciation and amortization for each of the Companys reporting segments is
as follows:

|                               |                     |                                     |   |                    |       |                   |   |       |       |  |   |       |        |  |   |       |        | 
|------------------------------ | ------------------- | ----------------------------------- | - | ------------------ | ----- | ----------------- | - | ----- | ----- |  | - | ----- | ------ |  | - | ----- | ------ | 
|                               |                     |                                     |   | Three Months Ended |       | Nine Months Ended
|                               |                     |                                     |   | September 30,      |       | September 30,    
|                               |                     |                                     |   |                    |       |                  
|(in thousands)                 |                     | 2003                                |   | 2002               |       | 2003              |   | 2002 
|                               |                     |                                     |   |                    |       |                   |   |      
|Depreciation and amortization: |                     |                                     |   |                    |       |                   |   |       |       |  |   |       |        |  |   |      
|                               | Electronic payments |                                     | $ | 1,898              |       |                   | $ | 2,462 |       |  | $ | 5,777 |        |  | $ | 8,212 |       
|                               | ATM management      |                                     |   | 1,151              |       |                   |   | 881   |       |  |   | 3,765 |        |  |   | 2,524 |       
|                               | Risk management     |                                     |   | 1,818              |       |                   |   | 1,792 |       |  |   | 5,014 |        |  |   | 5,500 |       
|                               | Global outsourcing  |                                     |   | 763                |       |                   |   | 752   |       |  |   | 2,341 |        |  |   | 2,276 |       
|                               | Corporate           |                                     |   | 2,794              |       |                   |   | 3,196 |       |  |   | 9,150 |        |  |   | 9,814 |       
|                               |                     |                                     |   |                    |       |                   |   |       |       |  |   |       |        |  |   |      
|                               |                     | Total depreciation and amortization |   | $                  | 8,424 |                   |   | $     | 9,083 |  |   | $     | 26,047 |  |   | $     | 28,326 | 
|                               |                     |                                     |   |                    |       |                   |   |       |       |  |   |       |        |  |   |      

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Revenue is attributed to geographic areas based on the location of the
corporate entity producing the revenue. The Companys total net revenue and
property and equipment by geographic area are as follows:

|               |                    |      |                    |         |                   |      |         |         |  |   |         |         |  |   |         |         | 
|-------------- | ------------------ | ---- | ------------------ | ------- | ----------------- | ---- | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|               |                    |      | Total Net Revenue 
|               |                    |      |                   
|               |                    |      | Three Months Ended |         | Nine Months Ended
|               |                    |      | September 30,      |         | September 30,    
|               |                    |      |                    |         |                  
|(in thousands) |                    | 2003 |                    | 2002    |                   | 2003 |         | 2002   
|               |                    |      |                    |         |                   |      |         |        
|United States  |                    | $    | 120,748            |         |                   | $    | 131,895 |         |  | $ | 360,305 |         |  | $ | 375,704 |        
|United Kingdom |                    |      | 3,843              |         |                   |      | 3,985   |         |  |   | 13,351  |         |  |   | 11,465  |        
|India          |                    |      | 4,606              |         |                   |      | 5,599   |         |  |   | 13,618  |         |  |   | 17,478  |        
|Other          |                    |      | 3,944              |         |                   |      | 2,516   |         |  |   | 9,351   |         |  |   | 6,816   |        
|               |                    |      |                    |         |                   |      |         |         |  |   |         |         |  |   |         |        
|               | Total consolidated |      | $                  | 133,141 |                   |      | $       | 143,995 |  |   | $       | 396,625 |  |   | $       | 411,463 | 
|               |                    |      |                    |         |                   |      |         |         |  |   |         |         |  |   |         |        

|               |                    |      |                        |        |              |   |        |        | 
|-------------- | ------------------ | ---- | ---------------------- | ------ | ------------ | - | ------ | ------ | 
|               |                    |      | Property and Equipment
|               |                    |      |                       
|               |                    |      | September 30,          |        | December 31,
|(in thousands) |                    | 2003 |                        | 2002  
|               |                    |      |                        |       
|United States  |                    | $    | 37,933                 |        |              | $ | 41,038 |       
|United Kingdom |                    |      | 339                    |        |              |   | 276    |       
|India          |                    |      | 10,740                 |        |              |   | 8,713  |       
|Other          |                    |      | 692                    |        |              |   | 737    |       
|               |                    |      |                        |        |              |   |        |       
|               | Total consolidated |      | $                      | 49,704 |              |   | $      | 50,764 | 
|               |                    |      |                        |        |              |   |        |       

NOTE 10  COMMITMENTS AND CONTINGENCIES:

Future commercial commitments

In connection with the Companys government services, collection and ATM
placement activities, the Company posts surety bonds with state agencies
guaranteeing its performance of certain obligations related to the relevant
contracts or state requirements. The aggregate amount of such bonds outstanding
at September 30, 2003 was $14.4 million.

At September 30, 2003, the Company provided guarantees of $1.0 million on
certain equipment lease payments for Canadian customers of its subsidiary
Access Cash International (ACI). These guarantees were established prior to
the Companys acquisition of ACI in 2001 and expire through December 2007. The
Company would be required to make payments under these guarantees in the event
that the ACI customers could not meet their own payment obligations. Through
September 30, 2003, the Company has been required to make payments of
approximately $176,000 pursuant to these guarantees. The customers ATM
equipment assets are utilized as collateral on these guarantees. There are no
amounts being carried as liabilities for the Companys obligations under these
guarantees.

The Company has approximately $0.5 million in time deposits, denominated in
Indian rupees, related to the guarantee by its Indian operations of performance
on a customer contract and certain obligations related to local government
requirements.

Contractual cash obligations
As of December 31, 2002, the Company had contractual cash obligations for
operating leases, outsourcing and maintenance obligations through 2012 in the
aggregate amount of $101.0 million. These contractual cash obligations had not
materially changed from this amount at September 30, 2003.

Other commitments
The Company operates a call center in Mumbai, India under a customer contract.
The customer is entitled to acquire a minority interest in, or sole ownership
of, certain assets used by the Company in performing call center operations for
the customer as well as transition assistance. The price at which such
ownership interest may be acquired by the customer is based on a formula as set
forth in the contract. As of September 30, 2003, the customer had earned a
discount of approximately 8% on the formula price for these assets.

ACI has vault cash agreements with various financial institutions which provide
cash to certain of the ATMs owned or managed by ACI. Although some portion of
this cash may be physically located in the ATMs owned or managed by ACI, this
cash is not included in cash and cash equivalents on the Companys consolidated
balance sheet because ACI does not take title to the cash under the
bailee/bailor relationship established by the agreements. Based upon

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the daily outstanding balance of funds provided to the ATMs, ACI generally pays
a monthly fee ranging from prime, as defined, plus one half percent up to prime
plus 5%. The average monthly rate paid during the first nine months of 2003
approximated 7.2%. The Company indemnifies the financial institutions against
any loss of the cash in the ATMs. One of the agreements requires ACI to
maintain a security amount equal to 1% of the daily outstanding balance. The
agreements may be terminated upon notice by either party and have various
expiration dates ranging from January to November 2004. Total cash provided
pursuant to these vault cash agreements was approximately $33 million at
September 30, 2003.

As part of its transaction processing business, the Company provides cash
settlement services to financial institutions and state and local governments.
These services involve the movement of funds between the various parties
associated with an ATM, POS or EBT transaction and this activity results in a
balance due to the Company at the end of each business day that it recoups over
the next few business days. The balances due the Company are included in cash
on its consolidated balance sheets. As of September 30, 2003, approximately
$29 million of settlement payments were due to the Company and it received
these funds in early October 2003. The Company is required to maintain
sufficient cash on hand to fund the daily settlement advances made by it
against the payments to be received through the settlement process. The
typical overnight settlement balance due to the Company ranges from $5 million
to $30 million. The Company also seeks to maintain an additional cash balance
of approximately $35 million to ensure that it can advance funds to its
processing customers if unusual circumstances prevent the Company from timely
processing their settlement files. The Company is evaluating means to reduce
the need to maintain these minimum cash balance levels, including the
possibility of obtaining an overnight credit facility to fund these
obligations.

The Companys agreements with users of its products and services generally
contain indemnity clauses under which the Company agrees to indemnify its
customers and hold them harmless from and against liabilities arising from
claims of patent, copyright or other intellectual property infringement brought
by a third party related to those products or services. The Companys
agreements may also provide indemnification for claims relating to property
damage or personal injury resulting from the performance of services by the
Company or its subcontractors. Historically, the Companys costs to defend
lawsuits or settle claims relating to these indemnity agreements have not been
significant.

The Companys amended and restated certificate of incorporation and by-laws
require it to indemnify its directors, officers, employees and other agents to
the fullest extent permitted by Delaware law. The Companys amended and
restated certificate of incorporation also permits the Company to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the amended and restated certificate of incorporation would permit such
indemnification. These indemnification obligations are implicated with respect
to the directors and officers of the Company named as defendants in the Federal
Securities Actions and Shareholder Derivative Actions described below.

Other contingencies

The Company is currently the subject of an investigation by the Securities and
Exchange Commission (SEC). The Company has been cooperating fully with the SEC
staff and intends to continue to do so. The Company may, however, become
subject to a fine or other remedies in connection with the investigation. The
Company has incurred, and may continue to incur, significant legal expenses in
connection with this investigation.

The Company and its current and former chief executive and chief financial
officers are defendants in three federal securities actions (the Federal
Securities Actions) filed in 2002 in the U.S. District Court for the Eastern
District of Wisconsin (the Wisconsin Federal Court). The complaints in these
actions are substantially identical and allege, among other things, that during
the period from February 2, 2001 to October 24, 2002 the defendants made false
and misleading statements and omissions of material facts and that the
plaintiffs and other members of a putative class of shareholders suffered
damages as a result. In September 2003, the Wisconsin Federal Court appointed
a lead plaintiff and lead counsel in the Federal Securities Actions,
consolidated the three actions and granted defendants motion to transfer the
actions to the U.S. District Court for the District of Arizona (the Arizona
Federal Court). The lead plaintiff is expected to file an amended consolidated
complaint in the Arizona Federal Court and the defendants intend to move to
dismiss that complaint on various grounds.

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The Company is also a nominal defendant in two substantially identical
shareholder derivative actions filed in the Superior Court of Arizona, Maricopa
County in January 2003 (the Shareholder Derivative Actions). The complaints
allege, among other things, that certain of the Companys current and former
directors named in the complaints as defendants breached their fiduciary duties
to the Company in connection with certain alleged issues involving the
Companys accounting practices and internal controls. The complaints also name
as a defendant the Companys external auditor. In response to a joint motion
by the parties in the Shareholder Derivative Actions, the Court stayed the
actions pending the resolution of the motions to dismiss the Federal Securities
Actions.

The Company believes the Federal Securities and Shareholder Derivative Actions
are without merit and intends to vigorously defend itself. However, the
Company cannot predict the outcome of these actions with certainty.

On June 17, 2003, the Company was sued in U.S. District Court, Middle District
of Florida, Fort Meyers Division by Russell V. Rosen (Rosen) alleging
violations of the Federal Drivers Privacy Protection Act. The plaintiff
alleges that the Company purchased motor vehicle records from the State of
Florida and used that data for marketing and other purposes that are not
permitted under the Federal law. The plaintiff is seeking actual damages to be
determined or liquidated damages of not less than $2,500 for each affected
member of the purported class, plus costs and attorneys fees. The plaintiff is
also asking for injunctive relief that would prohibit the Company from
obtaining, disclosing and using personal information of the plaintiff and other
members of the purported class in violation of the statute. On August 11, 2003,
the Company, and a number of other defendants, were sued in the U.S. District
Court, Southern District, Miami Division by Richard Fresco (Fresco) based on
substantially identical allegations to those made in the Rosen case. Venue in
the Rosen case has now also been transferred to the Miami District Court. The
Company cannot predict whether the plaintiffs in these cases will be successful
in certifying their complaints as class actions. The Company believes that it
has meritorious defenses with regard to the allegations made in these lawsuits
and intends to vigorously defend these actions.

NOTE 11  SUBSEQUENT EVENTS:

On November 12, 2003, the Company acquired the assets of Oasis Technology,
Ltd., a privately held provider of transaction processing software. The total
purchase price (including a working capital adjustment) was approximately $30 million, of which approximately $28
million was paid in cash and the remainder was placed in escrow.

On October 31, 2003, the Company completed the sale of its facility in Runcorn,
United Kingdom and recorded an approximate $0.5 million gain on the sale of the
property in that month. As of September 30, 2003, this property was the last
remaining asset held for sale as reflected on the Companys balance sheet.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion together with our condensed
consolidated financial statements and the notes to those financial statements
included in this Quarterly Report on Form 10-Q and the 2002 Annual Report on
Form 10-K we previously filed with the Securities and Exchange Commission. In
addition to historical information, this discussion contains forward-looking
statements as defined in the U.S. Private Securities Litigation Reform Act of
1995. All forward-looking statements are subject to various risks and
uncertainties that could cause our actual future results to differ materially
from those presently anticipated due to a variety of factors, including those
discussed in the risk factors and cautionary statements in Part II, Item 5 of
this Quarterly Report on Form 10-Q.

OVERVIEW

eFunds Corporation and its wholly-owned subsidiaries (the Company, we or
us) provide transaction processing, risk management and professional and
outsourcing services to financial institutions, retailers, electronic funds
transfer networks and government agencies. The Company has four operating
segments: Electronic Payments; Automated Teller Machine (ATM) Management; Risk
Management; and Global Outsourcing. The Electronic Payments segment provides
electronic funds transfer (EFT) software, software applications development,
maintenance and installation, EFT processing services, including automated
clearinghouse (ACH) processing as well as electronic benefits transfer (EBT)
services for government agencies. The ATM Management segment provides ATM
deployment, management and branding services. The Risk Management segment
provides risk management based data and other products to financial
institutions, retailers and other businesses that assist in detecting fraud and
assessing the risk of opening a new account or accepting a check. The Global
Outsourcing segment provides information technology and business process
outsourcing services.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles that are generally
accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates and judgments, including those related to revenue recognition,
intangible assets, reserves and allowances, income taxes and stock-based
compensation. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances. The
results of these estimates form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

We believe the following critical accounting policies affect the more
significant judgments and estimates we use in the preparation of our
consolidated financial statements.

Revenue recognition

Our net revenues consist of fees for transaction processing and related
services, risk management services, software maintenance and support,
government services, information technology consulting, business process
management services and software and data licensing. Our revenue recognition
policies for these various fees are as follows:



| |  | Transaction processing and service fees are recognized in the period that
the service is performed. These services consist of processing our
customers electronic debit transactions and settling the funds with the
financial institutions involved in the transactions. Additionally, these
services include monitoring ATMs to alert our customers when potential
problems occur. These fees are charged on a per transaction basis,
depending on the contractual arrangement with the customer. Government
services fees are recognized in the period services are provided based on
monthly fees per benefits recipient.                                                        
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | In connection with the provision of services in the ATM management services
segment, we earn surcharge and interchange fees. Surcharge fees are the
fees the user of an ATM pays at the time of the transaction and interchange
fees are paid by that users financial institution. Generally, our
arrangements call for us to pay a fee to the occupants of the property at
which the ATM is physically located. The amount of this fee typically has
some relationship to the surcharge and interchange fees that are collected
by us from that ATM. Based upon the underlying contractual provisions
related to our arrangements, we record the surcharge and interchange fees
that

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|  |  | we collect at their gross amounts as revenue and the amounts owed to the
occupant of the property at which the ATM is physically located as a
processing, communication and service cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Risk management fees are recognized as revenue in the period the
services are provided. Risk management services consist of new
account applicant and check verification screenings to manage the
risk associated with account openings and check acceptance. These
fees are based on the number of inquiries against the databases
used for screening purposes or monthly fees based on the net
monthly sales of the retailer using our check verification products
or other similar measures, depending on the product and service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | We also provide professional services consisting of information
technology consulting and business process management services.
Revenue from providing such services is generally recognized under
one of two methods, depending on the relevant contractual terms.
Under the time and materials method, which is applied to nearly all
of our professional services contracts, revenue is based on a fee
per hour basis and is recognized as hours are completed. Under the
fixed contract method, a pre-set fee is agreed upon for a project,
and revenue is recognized proportionately to the percentage of
completion of the project. If the information technology consulting
services involve the significant customization of software that has
been licensed from us, the license fee is also recognized
proportionately to the percentage of completion of the project.                                                                                                                                                                                                                             
| 
| |  | Software and data license fees for standard products are recognized
when a license agreement has been signed, the license fee is fixed
and determinable, collectibility of the license fee is probable,
delivery has occurred and there are no uncertainties surrounding
product acceptance. If a license contains customer acceptance
criteria for which significant uncertainties exist, the revenue is
recognized upon the earlier of customer acceptance or the
expiration of the acceptance period. Certain of our software
products include multiple modules and the license fee charged to
the customer is based on the modules licensed. If a customer
contract requires that we deliver multiple elements, then upfront
fees are recognized as revenue if vendor specific objective
evidence of fair value exists for each of the undelivered elements.
If vendor specific objective evidence of fair value does not exist
for the undelivered elements, then the total fees of the
arrangement are recognized over the term of the related agreement
based upon delivery of all essential elements.
| 
| |  | Software maintenance and support revenue is recognized ratably over
the term of the contract or as the services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

The process involved in evaluating the appropriateness of revenue recognition
involves judgments about vendor specific objective evidence of the fair value
of each of the various elements to be delivered in a sale that has multiple
components, collectibility of fees, and projections of costs to complete
projects for our customers.

Intangible Assets

Our intangible assets consist primarily of goodwill, capitalized software costs
and acquired contracts. We capitalize the cost of software developed or
obtained for internal use once the preliminary project stage has been
completed, management commits to funding the project and it is probable that
the project will be completed and that the software will be used to perform the
function intended. Capitalized costs include only (1) external direct costs of
materials and services consumed in developing or obtaining internal-use
software, (2) payroll and payroll-related costs for employees who are directly
associated with and who devote time to the internal-use software project and
(3) interest costs incurred, when material, while developing internal-use
software. Capitalization of costs ceases when the project is substantially
complete and the software is ready for its intended use. Software developed or
obtained for internal use is tested for impairment whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable.

We capitalize the cost of software developed for licensing and resale once
technological feasibility has been established. Costs incurred prior to
establishing technological feasibility are expensed as incurred. Technological
feasibility is established when we have completed all planning, designing,
coding and testing activities that are necessary to determine that a product
can be produced to meet its design specifications, including functions,
features and technical performance requirements. Capitalization of costs ceases
when the product is available for general release to customers. Such costs are
amortized on a product-by-product basis normally over three years and no longer
than five years. Software developed for resale is carried at the lesser of
amortized cost or net realizable value.

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When we acquire other companies, generally accepted accounting principles
require that we make estimates regarding the fair value of the acquired
companys tangible assets and liabilities and identifiable intangible assets.
Based upon these estimates, we then allocate the purchase price to the assets
and liabilities of the acquired company for the purpose of recording these
items in our financial records. Any unallocated purchase price is considered to
be, and recorded as, goodwill. The distinction between the amount of the
purchase price allocated either to tangible assets and liabilities or
identifiable intangible assets and goodwill is significant because goodwill is
not amortized to our statement of operations but is instead subject to an
annual impairment test. Estimates inherent in this purchase price allocation
process include assumptions regarding the timing and amounts of future cash
inflows and outflows, the salability of inventories, selection of discount
rates, contract renewal rates and general market conditions. Where appropriate,
we use third-party valuation professionals to assist us in making these
estimates.

The process of evaluating goodwill and other intangible assets, including
capitalized software costs and acquired contracts, for impairment involves
judgments about market conditions and economic indicators, estimates of future
cash flows and assumptions about our strategic plans with regard to our
operations. To the extent additional information arises or our strategies
change, it is possible that our conclusions regarding the carrying value of our
intangible assets could change and materially affect our financial position or
results of operations.

Reserves and Allowances

We maintain a reserve for expected future losses on certain government EBT
contracts. Our estimates of these losses are based on a variety of assumptions
including assumptions about future welfare case levels, the number of
transactions per case and the costs related to processing these transactions
and providing support services. These assumptions are subject to significant
uncertainties and may differ substantially from actual results. In the event
such differences arise, a revision to the loss contract reserve would be
required. Any such revision could have a material effect on our financial
position or results of operations.

We maintain an allowance for doubtful accounts for estimated losses resulting
from our customers failing to make required payments. We develop our estimate
of this allowance based on our experience with specific customers, our
understanding of their current economic circumstances and our own judgment as
to the likelihood of their ultimate payment. We also consider our collection
experience with the balance of our receivables portfolio and make estimates
regarding collectibility based on trends in aging. If the financial condition
of our customers were to deteriorate, thereby impairing their ability to make
payments, an increase in this allowance could be required in a future period.

Income Taxes

Accounting for income taxes requires significant judgments in the development
of estimates used in income tax calculations. Such judgments include, but are
not limited to, the likelihood that the Company will realize the benefits of
net operating loss carry-forwards, the adequacy of valuation allowances, the
rates used to measure transactions with foreign subsidiaries and the
development of valuation models used for measuring the value of certain
transactions. Further, our operations are governed by and subject to government
regulations in the United States and in foreign countries in which we operate,
including laws and regulations relating to taxation and the judgments and
estimates we use are subject to challenge by domestic and foreign taxing
authorities. The Company recognizes tax liabilities at such time as they are
judged to be probable of being incurred and they can be reasonably estimated.
It is possible that either foreign or domestic taxing authorities could
challenge our judgments and estimates and draw conclusions that would cause us
to incur tax liabilities in excess of those currently recorded.

We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. Although we have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
determine that we will be able to realize our deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the deferred tax asset
would increase income in the period any such determination was made. Likewise,
should we determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period any such determination was made.

We consider the undistributed earnings of our foreign subsidiaries to be
permanently invested and, accordingly, we have not provided for U.S. Federal,
state income or applicable foreign withholding taxes on those amounts.
Undistributed earnings of our foreign subsidiaries amounted to approximately
$26.5 million at September 30, 2003.

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Upon any distribution of those earnings in the form of dividends or otherwise,
we would be subject to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and applicable withholding taxes payable to the foreign
countries. Determination of the amount of unrecognized deferred U.S. income tax
liability is not practicable because of the complexities associated with such a
hypothetical calculation.

Stock-based compensation

We issue stock options to our employees under the eFunds Corporation 2000 Stock
Option Plan. Generally accepted accounting principles provide two alternative
methods of accounting for stock options issued under the terms and conditions
pursuant to which we typically issue options. One alternative is to estimate
the fair value of the stock option at the date of grant and amortize that value
as an expense to operations over the contractual vesting period. The other
option available currently to companies reporting under generally accepted
accounting principles is to estimate the fair value of the option at the grant
date but only reflect the pro-forma impact of the amortization in a footnote to
the financial statements and to forgo adjusting the statement of operations.
The method a company chooses to apply is a matter of policy. Consistent with
our past practices, we utilize the second of these options and we reflect the
pro-forma impact of the option amortization in the footnotes to our financial
statements. As illustrated in Note 2 to the financial statements, were we to
change our accounting policy on this matter to reflect the expense in our
statement of operations, or should generally accepted accounting principles
change to require us to reflect this expense in our statements of operations,
our results of operations would be adversely affected.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the relative
composition of net revenue and selected statements of operations data as a
percentage of net revenue:

|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |      |       | 
|-------------------------- | ------------------------------------------- | ------------------------ | ---- | ------------------ | ----- | ----------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- |  | ---- | ---- | ----- | 
|                           |                                             |                          |      | Three Months Ended |       | Nine Months Ended
|                           |                                             |                          |      | September 30,      |       | September 30,    
|                           |                                             |                          |      |                    |       |                  
|                           |                                             |                          |      | 2003               |       | 2002              |      | 2003 |       | 2002
|                           |                                             |                          |      |                    |       |                   |      |      |       |     
|Net revenue                |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|                           | Electronic payments                         |                          |      | 33.9               | %     |                   |      | 37.0 | %     |      |      | 33.7 | %     |  |      | 39.6 | %    
|                           | ATM management                              |                          |      | 27.2               |       |                   |      | 24.3 |       |      |      | 26.8 |       |  |      | 20.2 |      
|                           | Risk management                             |                          |      | 26.0               |       |                   |      | 23.4 |       |      |      | 25.4 |       |  |      | 24.1 |      
|                           | Global outsourcing                          |                          |      | 12.9               |       |                   |      | 15.3 |       |      |      | 14.1 |       |  |      | 16.1 |      
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|                           |                                             | Total net revenue        |      |                    | 100.0 |                   |      |      | 100.0 |      |      |      | 100.0 |  |      |      | 100.0 | 
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|Operating expenses         |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|                           | Processing, communication and service costs |                          |      | 43.6               |       |                   |      | 43.8 |       |      |      | 43.8 |       |  |      | 40.6 |      
|                           | Employee costs                              |                          |      | 33.4               |       |                   |      | 29.6 |       |      |      | 34.4 |       |  |      | 33.9 |      
|                           | Depreciation and amortization               |                          |      | 6.3                |       |                   |      | 6.3  |       |      |      | 6.5  |       |  |      | 6.9  |      
|                           | Other operating costs                       |                          |      | 7.3                |       |                   |      | 6.7  |       |      |      | 8.7  |       |  |      | 7.0  |      
|                           | Restructuring and asset impairment charges  |                          |      | 2.0                |       |                   |      | 4.2  |       |      |      | 0.7  |       |  |      | 4.0  |      
|                           | Reversal of provision for contract losses   |                          |      | (1.7               | )     |                   |      | (1.4 | )     |      |      | (0.6 | )     |  |      | (0.5 | )    
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|                           |                                             | Total operating expenses |      |                    | 90.9  |                   |      |      | 89.2  |      |      |      | 93.5  |  |      |      | 91.9  | 
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|Income from operations     |                                             |                          | 9.1  |                    |       |                   | 10.8 |      |       |      | 6.5  |      |       |  | 8.1  |     
|Other income  net         |                                             |                          | (0.7 | )                  |       |                   | (0.2 | )    |       |      | 0.0  |      |       |  | 0.1  |     
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|Income before income taxes |                                             |                          | 8.4  |                    |       |                   | 10.6 |      |       |      | 6.5  |      |       |  | 8.2  |     
|Provision for income taxes |                                             |                          | (1.6 | )                  |       |                   | (3.2 | )    |       |      | (1.8 | )    |       |  | (2.4 | )   
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     
|Net income                 |                                             |                          | 6.8  | %                  |       |                   | 7.4  | %    |       |      | 4.7  | %    |       |  | 5.8  | %   
|                           |                                             |                          |      |                    |       |                   |      |      |       |      |      |      |       |  |      |     

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2002

Net revenue Net revenue decreased $10.9 million, or 7.6%, to $133.1 million
for the third quarter of 2003 from $144.0 million for the same period of 2002.
Net revenue decreased $14.9 million for the first nine months of 2003, or 3.6%,
to $396.6 million from $411.5 million for the first nine months of 2002.

Electronic Paymentsnet revenue decreased $8.0 million, or 15.0%, to $45.2
million in the third quarter of 2003 as compared to $53.2 million for the same
period of 2002. Net revenue decreased $29.2 million, or 17.9%, to $133.8
million for the first nine months of 2003 from $163.0 million for the first
nine months of 2002. The expiration of our processing contract with the STAR
network at the end of the third quarter of 2002 contributed significantly to
this decline. Revenues under this contract were $5.3 million and $16.6 million
for the third quarter and first nine months of 2002, respectively. Processing
revenues were also affected by price concessions given in 2003 in connection
with contract renewals and extensions. Revenue from our government services
business also declined

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due to the expiration of contracts at the end of 2002 that previously generated
approximately $16 million in annual revenues. The effect of these expirations
was offset somewhat by revenues from new EBT contracts and increased revenues
on existing EBT contracts.

Citibank has been awarded the new EBT contract for the Western States EBT
Alliance (WSEA) and we currently act as a subcontractor to Citibank servicing
this coalition. We expect, however, that our role as subcontractor to the WSEA
will be discontinued under the new contract. This transition began to impact
our business in the third quarter of 2003 and we expect to see our revenues
from this coalition largely roll-off by the end of 2004. Revenues from this
coalition for the first nine months of 2003 were approximately $4 million.

Revenues from software sales were flat in the third quarter of 2003 as compared
to the same period of the prior year, and decreased $4.5 million for the first
nine months of 2003 as compared to 2002. The following table illustrates our
revenue from software sales:

|                       |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 
|---------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                       |  | Three Months Ended |       | Nine Months Ended
|                       |  | September 30,      |       | September 30,    
|                       |  |                    |       |                  
|(in thousands)         |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                       |  |                    |       |                   |  |      |       |     
|License fees           |  | $                  | 2,197 |                   |  | $    | 1,589 |      |  | $ | 7,817  |  |  | $ | 11,237 | 
|Maintenance            |  |                    | 2,906 |                   |  |      | 3,280 |      |  |   | 9,633  |  |  |   | 9,988  | 
|Software modifications |  |                    | 1,397 |                   |  |      | 1,875 |      |  |   | 4,372  |  |  |   | 5,103  | 
|                       |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 
|                       |  | $                  | 6,500 |                   |  | $    | 6,744 |      |  | $ | 21,822 |  |  | $ | 26,328 | 
|                       |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 

ATM Managementnet revenue increased $1.3 million, or 3.7%, to $36.2 million in
the third quarter of 2003 from $34.9 million for the same period in 2002, and
increased $23.3 million, or 28.0%, to $106.4 million for the first nine months
of 2003 from $83.1 million for the first nine months of 2002. These increases
are primarily due to our acquisitions of independent ATM networks during the
first three quarters of 2002. In addition, ATM branding revenues and equipment
sales increased approximately $2 million and $3 million, respectively, in the
first nine months of 2003 as compared to the same period in 2002. We expect ATM
revenues to reflect a seasonal decrease in the last quarter of 2003.

Risk Managementnet revenue increased $0.8 million, or 2.4%, to $34.6 million
for the third quarter in 2003 from $33.8 million in the third quarter of 2002,
and increased $1.3 million, or 1.3%, to $100.5 million for the first nine
months of 2003 from $99.2 million for the same period in 2002. Revenues from
our ChexSystemsSM suite of products increased in both periods of 2003 as
compared to the same periods of the prior year. These increases were, however,
somewhat offset by declines in revenue from of our SCANSM products over the
prior year periods due to pricing concessions. We expect that revenues from our
ChexSystems suite of products will continue to increase over prior year results
and that revenue from our SCAN products will remain largely flat during the
next several months.

Global Outsourcingnet revenue decreased $4.9 million, or 22.2%, to $17.2
million for the third quarter of 2003 from $22.1 million for the same period of
the prior year, and decreased $10.2 million, or 15.4%, to $56.0 million for the
first nine months of 2003 from $66.2 million in 2002. The decreases are
primarily due to an approximate $11 million decline in the revenues we received
from Deluxe Corporation for the first nine months of 2003 as compared to the
prior year. In accordance with our agreement with Deluxe, a minimal short-fall
fee, based upon a formula in the contract reflective of our estimated lost
profits, will be billed to Deluxe if it fails to reach the minimum target level
of $43 million for software development services for 2003. We do not currently
anticipate that our 2003 revenues from Deluxe will achieve this minimum target
level.

Business process management (BPM) revenues, which include outsourcing and
customer contact center services, increased approximately $0.7 million and $1.2
million in the third quarter and first nine months of 2003, respectively, as
compared to the same period of the prior year due to additional services
provided under existing contracts. Future growth in our BPM business will
depend on this expansion of the services we provide our existing clients and
the acquisition of new clients.

Processing, communication and service costs This category includes the cost
of transaction processing, telecommunications expense, computer and ATM
equipment, promotional services and the payments we make to the occupants of
the property where the ATMs we own or manage are located. Total costs in this
category decreased $5.0 million, or 7.9%, to $58.0 million for the third
quarter of 2003 from $63.0 million for the same period of the

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prior year, and increased $6.8 million, or 4.1%, to $173.7 million for the
first nine months of 2003 from $166.9 million for 2002. These costs were 43.6%
and 43.8% of net revenues in the third quarter and first nine months of 2003,
respectively, compared to 43.8% and 40.6% in the respective periods for 2002.
The payments we make to the occupants of the properties where the ATMs we own
or manage are located have increased approximately $2 million for the third
quarter of 2003 and approximately $16 million for the first nine months of 2003
commensurably with increases in ATM processing volumes due to the acquisitions
in the ATM management services segment. This increase in fees was somewhat
offset by reductions in equipment maintenance and telecommunication costs due
to consolidation and renegotiation of these services and reductions in service
costs related to our risk management services due in large part to the
transitioning of certain contact center operations from subcontractors to our
contact center in India.

Employee costs Expenditures in this category represent employee compensation
and related employee expenses, benefits and travel. These costs increased $1.7
million, or 4.0%, to $44.4 million for the third quarter of 2003 from $42.7
million for the same period of 2002 and decreased $3.0 million, or 2.2%, to
$136.4 million for the first nine months of 2003 from $139.4 million in 2002.
As a percentage of net revenue, employee costs were 33.4% and 34.4% for the
third quarter and first nine months of 2003, respectively, compared to 29.6%
and 33.9% for the same periods of the prior year.

Although our full-time equivalent employees increased from approximately 4,300
at September 30, 2002 to 4,700 at September 30, 2003, we have realized cost
savings of approximately $4 million and $14 million for the third quarter and
first nine months of 2003, respectively, from our restructuring efforts,
including the re-deployment of certain product development and business process
activities to our India based operations. We expect this trend to continue in
future periods, although at a reduced rate from that seen during 2003. At
September 30, 2003, more than 60% of our full-time equivalent employees were
located at our Indian facilities.

This cost decrease was offset by an increase in performance-based compensation
of approximately $5 million and $10 million for the third quarter and first
nine months of 2003, respectively. The accrual for performance-based
compensation was eliminated during the second quarter of 2002 but has been
reinstated for 2003.

Depreciation and amortization These costs represent the depreciation of our
facilities and equipment and the amortization of our intangible assets, such as
capitalized software costs and acquired contracts. Depreciation and
amortization expense decreased $0.7 million, or 7.7%, to $8.4 million for the
third quarter of 2003 from $9.1 million for the same period of 2002, and
decreased $2.3 million, or 8.1%, to $26.0 million for the first nine months of
2003 from $28.3 million for the same period of the prior year. These costs were
6.3% and 6.5% of net revenue for the third quarter and first nine months of
2003, respectively, and 6.3% and 6.9% of net revenue for the same periods of
the prior year. The decrease over the nine month period is due to the cessation
of depreciation of certain assets reclassified as held for sale during the
third quarter of 2002. These reductions were partially offset by an increase
in the amortization of customer contracts acquired with the independent ATM
businesses purchased during 2002.

Other operating costs Expenditures in this category include facility costs,
professional, consulting and temporary services, bad debt, and certain
administrative costs. Other operating expenses were relatively flat at $9.7
million and $9.6 million for the third quarter of 2003 and 2002, respectively,
and increased $5.6 million, or 19.4%, to $34.4 million for the first nine
months of 2003 from $28.8 million in 2002. These expenses were 7.3% and 8.7% of
net revenue for the third quarter and first nine months of 2003, respectively,
and 6.7% and 7.0% for the same periods in the prior year. The increase in the
first nine months of 2003 is due to a $2.5 million reduction to the estimate
for uncollectible accounts we recorded in the second quarter of the 2002 and
increased expense in 2003, including an increase of approximately $6 million
for consulting fees related to the business improvement initiatives we
commenced in the fourth quarter of 2002. These initiatives are focused on
process enhancements that have resulted, and we believe will continue to
result, in cost savings through improved operating efficiencies. We expect to
continue to incur consulting fees related to this effort into 2004.

Restructuring and asset impairment charges During the third quarter of 2002,
we recorded restructuring and asset impairment charges of $1.1 million in
severance benefits, impairment of fixed assets and lease related costs of $1.2
million, impairment of software costs of $0.8 million, and the write-down of
net assets held for sale of $3.0 million related to a building in Glendale,
Wisconsin. Restructuring and asset impairment charges for the first nine
months of 2002 represent the total of the second and third quarter charges for
that year. The charges for the second quarter

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consisted of $3.4 million in severance benefits, impairment of fixed assets and
lease related costs of $5.7 million and a net charge of $1.3 million related to
software impairment and other charges.

During the third quarter of 2003, we reversed $0.9 million of the lease related
charges we recorded during 2002 because we were successful in subleasing a
portion of the properties subject to these leases. Due to the business process
improvement initiatives identified during the current year, we recorded
restructuring charges of $3.5 million for severance benefits during the third
quarter of 2003. We may incur additional restructuring charges related to
severance benefits for the remainder of 2003, although we do not expect those
charges, if incurred, to be substantial. We expect a significant portion of the
personnel reductions reflected in the third quarter severance charge to
positively impact our cash flow by the end of 2003.

Reversal of provision for
contract losses In the third quarter of 2003, we
recorded a $2.3 million benefit related to a reduction in our estimate of
future losses on certain government EBT contracts. A similar net benefit of
$2.0 million was taken in the third quarter of 2002.

Other income (expense)  net Other expense  net was $0.9 million for the
third quarter of 2003 compared to $0.2 million for the same period of the prior
year, and $0.1 million for the first nine months of 2003 compared to other
income  net of $0.4 million in 2002. Interest and investment income was $0.4
million for each of the third quarters of 2003 and 2002, and increased to $1.6
million for the first nine months of 2003 from $1.1 million for 2002. This
income was offset in the third quarter of 2003 by a $1.2 million write down we
recorded on our 15% interest in Webtel Pty Ltd. to reduce the carrying value of
that investment to its estimated fair value.

Provision for income taxesThe provision for income taxes was $2.2 million
and $6.8 million for the third quarter and first nine months of 2003. Our
effective tax rate in the third quarter of 2003 of approximately 19.5% reflects
the benefit of certain permanent deductions taken by the Company in the current
quarter, some of which related to prior tax years, and the resulting necessity
to adjust for the full effects of the new estimated annual rate in the current
quarter. We expect our estimated tax rate to be between 30% and 31% for the
fourth quarter of 2003.

Our effective tax rate is determined largely by the proportional share of our
projected consolidated income earned by our Indian subsidiary. Our Indian
software development and business process management operations qualify for tax
incentives associated with businesses that operate within designated geographic
locations within India. These incentives generally provide us with exemptions
from Indian income tax on certain business income generated from these
operations and phase out through March 2009.

Business Segment Information
The following table presents, for the periods indicated, operating income by
segment as a percentage of segment revenue and the unallocated corporate
expenses and income from operations as a percentage of total revenue:

|                                      |                                     |  |                    |      |                   |  |      |       |      |  |  |      |   |  |  |       |  
|------------------------------------- | ----------------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ----- | ---- |  |  | ---- | - |  |  | ----- | -
|                                      |                                     |  | Three Months Ended |      | Nine Months Ended
|                                      |                                     |  | September 30,      |      | September 30,    
|                                      |                                     |  |                    |      |                  
|                                      |                                     |  | 2003               |      | 2002              |  | 2003 |       | 2002
|                                      |                                     |  |                    |      |                   |  |      |       |     
|Income (loss) from operations         |                                     |  |                    |      |                   |  |      |       |      |  |  |      |   |  |  |      
|(as a percentage of segment revenue): |                                     |  |                    |      |                   |  |      |       |      |  |  |      |   |  |  |      
|                                      | Electronic payments                 |  |                    | 25.6 | %                 |  |      | 37.8  | %    |  |  | 23.1 | % |  |  | 33.1  | %
|                                      | ATM management                      |  |                    | 1.1  |                   |  |      | (0.9  | )    |  |  | 0.5  |   |  |  | (2.1  | )
|                                      | Risk management                     |  |                    | 29.0 |                   |  |      | 19.5  |      |  |  | 27.1 |   |  |  | 11.7  |  
|                                      | Global outsourcing                  |  |                    | (3.0 | )                 |  |      | 17.5  |      |  |  | 0.7  |   |  |  | 17.7  |  
|(as a percentage of total revenue):   |                                     |  |                    |      |                   |  |      |       |      |  |  |      |   |  |  |      
|                                      | Corporate                           |  |                    | (7.0 | )                 |  |      | (10.3 | )    |  |  | (8.4 | ) |  |  | (10.2 | )
|                                      | Consolidated income from operations |  |                    | 9.1  | %                 |  |      | 10.8  | %    |  |  | 6.5  | % |  |  | 8.1   | %

Income from operations in the Electronic Payments segment decreased to $11.6
million for the third quarter of 2003 from $20.1 million for the third quarter
of the prior year and decreased to $30.9 million for the first nine months of
2003 from $54.0 million for 2002. As a percent of net segment revenues,
operating margins were 25.6% and 23.1% for the third quarter and first nine
months of 2003, respectively, a decrease from the operating margins of 37.8%
and 33.1% for the same periods of the prior year. Margins in the Electronic
Payments segment reflect restructuring

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charges of $1.0 million and $0.9 million for the third quarters in 2003
and 2002, respectively, and reflect the reversal of the provision for contract
losses of $2.3 million and $2.0 million for the third quarter of 2003 and 2002,
respectively. Margins in the current year have been adversely affected by the
expiration of processing and government services contracts during 2002 and
pricing concessions given in 2003. In addition, margins decreased during the
first nine months of 2003 due to reduced software sales compared to the prior
year period.

Income from operations in the ATM Management segment increased to $0.4 million
for the third quarter of 2003 from a loss of $0.3 million for the same period
of 2002, and increased to $0.5 million for the first nine months of 2003
compared to a loss of $1.7 million in 2002. As a percent of net segment
revenues, operating margins were 1.1% and 0.5% for the third quarter and first
nine months of 2003, respectively, an increase from the negative margins of
0.9% and 2.1% for the same periods of the prior year. This improvement resulted
from higher branding revenues and equipment sales. We will continue to seek to
improve the margins in this business in future periods by offering a
comprehensive suite of ATM management services to large retailers and financial
institutions.

Income from operations in the Risk Management segment was $10.0 million for the
third quarter of 2003 compared to $6.6 million in the same period of the prior
year. Operating income increased to $27.3 million for the first nine months of
2003 from $11.6 million in the prior year. As a percent of net segment
revenues, operating margins were 29.0% and 27.1% for the third quarter and
first nine months of 2003, respectively, an increase from the 19.5% and 11.7%
for the same periods of the prior year. This improvement is the result of the
elimination of low margin product lines and a reduction in employee and third
party processing costs. In addition, restructuring costs of $5.0 million were
charged to this segment during the first nine months of 2002.

Our Global Outsourcing business segment reported a loss of $0.5 million for the
third quarter of 2003 compared to income of $3.9 million for the same period of
the prior year, and income from operations decreased to $0.4 million for the
first nine months of 2003 from $11.7 million in 2002. Operating margins were
(3.0)% and 0.7% of net segment revenues for the third quarter and first nine
months of 2003, respectively, a decrease from the 17.5% and 17.7% seen in the
respective periods of the prior year. The prior year results benefited from
the reversal of the accrual for performance-based compensation and the current
year results have been adversely impacted by the reduction in IT outsourcing
and BPM services provided to Deluxe and pricing concessions on existing
contracts. Certain of our business process improvement initiatives are
directed toward this segment and we believe our margins in this segment will
begin to show improvement over the remainder of 2003.

Unallocated corporate overhead includes, among other things, executive
leadership costs, investor relations, general legal, consulting, accounting and
finance costs and certain technology costs. These expenses decreased to $9.3
million for the third quarter of 2003 from $14.8 million for the third quarter
of 2002, and decreased to $33.4 million in the first nine months of 2003 from
$42.1 million in 2002. The third quarter and first nine months of 2002 included
net restructuring charges of $4.0 million and $6.9 million compared to a net
benefit of $0.3 million for the same periods of this year. The third quarter
and first nine months of 2003 also benefited from reductions in
telecommunications costs.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

At September 30, 2003, net working capital was $170.7 million, compared to
$149.8 million at December 31, 2002. Cash and cash equivalents, including our
cash in ATMs of approximately $5 million, totaled $172.1 million at September
30, 2003, an increase of $52.6 million from December 31, 2002. This increase
was the result of positive operating cash flow and the $11.9 million in
proceeds we received from the sale of our Glendale facility. At September 30,
2003, we had $1.1 million of restricted cash that we temporarily hold in
custodial accounts on behalf of clients and $0.4 million of deposits subject to
compensating balance arrangements. Included in cash and cash equivalents at
September 30, 2003 was approximately $14 million held in Indian bank accounts
denominated in Rupees or U.S. Dollars. These funds are available for
international operations and investments. Repatriation of these funds to the
United States, other than through ordinary course of business intercompany
settlements, would however, likely have unfavorable tax implications.

As part of our transaction processing business, we provide cash settlement
services to financial institutions and state and local governments. These
services involve the movement of funds between the various parties associated
with an ATM, POS or EBT transaction and this activity results in a balance due
to us at the end of each business day that

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we recoup over the next few business days. The balances due us are included in
cash on our consolidated balance sheets. As of September 30, 2003,
approximately $29 million of settlement payments were due to us and we received
these funds in early October 2003. We are required to maintain sufficient cash
on hand to fund the daily settlement advances we make against the payments we
receive through the settlement process. The typical overnight settlement
balance due to us ranges from $5 million to $30 million. We also seek to
maintain an additional cash balance of approximately $35 million to ensure that
we can advance funds to our processing customers if unusual circumstances
prevent us from timely processing their settlement files. We are evaluating
means to reduce the need for us to maintain these minimum cash balance levels,
including the possibility of obtaining an overnight credit facility to fund
these obligations.

We have vault cash agreements with various financial institutions that provide
cash to certain of the ATMs owned or managed by us. Although some portion of
this cash may be physically located in the ATMs that we own or manage, these
funds are not included in cash and cash equivalents on our consolidated balance
sheet because we do not take title to it under the bailee/bailor relationship
as established by the agreements. Based upon the daily outstanding balance of
funds provided to the ATMs, we generally pay a monthly fee ranging from prime,
as defined, plus one half percent up to prime plus 5%. We indemnify the
financial institutions against any loss of the vault cash in the ATMs. One of
the agreements requires us to maintain a security amount equal to 1% of the
daily outstanding balance. The average monthly rate paid during the first nine
months of 2003 approximated 7.2%. The agreements may be terminated upon notice
by either party and have various expiration dates ranging from January to
November 2004. Total cash provided pursuant to these vault cash agreements was
approximately $33 million at September 30, 2003.

Our operations, capital expenditures and acquisitions are financed primarily by
the cash flow from our operations. Our short-term liquidity needs and long
term capital expenditure requirements will be provided from cash and cash
equivalents on hand and cash flow from operations.

Prior to our acquisition of ACI in 2001, we had committed to guarantee up to
approximately $1.8 million of equipment lease payments for its Canadian
customers and as of September 30, 2003, we had guaranteed lease payments
amounting to $1.0 million. Through September 30, 2003, we have been required to
make payments of $176,000 pursuant to these guarantees.

We have pledged $0.5 million of time deposits, denominated in Indian Rupees, as
collateral related to a guarantee of performance on a customer contract and
certain obligations related to local government requirements.

In connection with our government services business and our collection and ATM
placement activities, we post surety bonds with state agencies guaranteeing our
performance of certain obligations related to the relevant contracts or state
requirements. The aggregate amount of such bonds outstanding at September 30,
2003 was $14.4 million.

As of December 31, 2002 our contractual cash obligations for operating leases,
outsourcing and maintenance obligations totaled $101 million through 2012. Our
contractual cash obligations had not materially changed from this amount at
September 30, 2003. Obligations under capital leases at September 30, 2003
totaled $8.5 million and are payable through 2007.

The following table sets forth a summary of our cash flow activity and should
be read in conjunction with our consolidated statements of cash flows:

|                                          |  |                                 |        |      |  |   |         |  
|----------------------------------------- |  | ------------------------------- | ------ | ---- |  | - | ------- | -
|                                          |  | Summary of Cash Flows          
|                                          |  | Nine Months Ended September 30,
|                                          |  |                                
|(in thousands)                            |  | 2003                            |        | 2002
|                                          |  |                                 |        |     
|Cash provided by operating activities     |  | $                               | 57,316 |      |  | $ | 57,405  |  
|Cash used in investing activities         |  |                                 | (5,413 | )    |  |   | (52,848 | )
|Cash provided by financing activities     |  |                                 | 731    |      |  |   | 476     |  
|                                          |  |                                 |        |      |  |   |         |  
|Net increase in cash and cash equivalents |  | $                               | 52,634 |      |  | $ | 5,033   |  
|                                          |  |                                 |        |      |  |   |         |  

Cash flows from operating activities were approximately $57.3 million and $57.4
million for the nine months ended September 30, 2003 and 2002, respectively.
The positive operating cash flow is attributable primarily to income we earned,
as adjusted for the non-cash effect of depreciation and amortization, and the
effect of changes in other assets and liabilities, which includes increases in
accrued expenses such as performance-based compensation and income taxes.

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Cash used in investing activities was $5.4 million for the nine months ended
September 30, 2003. Our investing activities for this period included net
proceeds of $11.9 million from the sale of our Glendale facility offset by
expenditures for fixed assets and software of $15.1 million. Cash used in
investing activities was $52.8 million for the nine months ended September 30,
2002, primarily related to the $35.2 million used in connection with the
acquisition of independent ATM management companies and assets and expenditures
for fixed assets and software of $17.8 million.

Cash provided by financing activities was $0.7 million for the nine months
ended September 30, 2003. We received $2.0 million from the exercise of stock
options and purchases pursuant to our employee stock purchase plan, and we used
cash to repay debt of $1.2 million. Cash provided by financing activities was
$0.5 million for the nine months ended September 30, 2002. We used cash to
repay debt of $2.3 million during this period, although these payments were
more than offset by the proceeds from the exercise of stock options and
purchases pursuant to our employee stock purchase plan of $2.8 million.

RECENT ACCOUNTING
PRONOUNCEMENTSNew Accounting Pronouncements
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF
Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or
rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
adoption of EITF Issue No. 00-21 did not have a material effect on our
consolidated financial position or results of operations.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial
Statements. Interpretation No. 46 prescribes how to identify variable interest
entities and how an enterprise assesses its interests in a variable interest
entity to decide whether to consolidate that entity. This interpretation
requires existing unconsolidated variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse
risks among parties involved. Interpretation No. 46 is effective immediately
for variable interest entities created after January 31, 2003 and to variable
interest entities in which an enterprise obtains an interest after that date.
The interpretation applies in the first fiscal year or interim period beginning
after December 15, 2003, to variable interest entities in which an enterprise
holds a variable interest that it acquired before February 1, 2003. We do not
believe the adoption of Interpretation No. 46 will have a material impact on
our financial position or results of operations.

FORWARD-LOOKING STATEMENTS 
In addition to historical and pro forma information, this Quarterly Report
contains forward-looking statements as defined in the U.S. Private Securities
Litigation Reform Act of 1995. All forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from those described in the statements. Some of the factors that
could cause actual results to differ from those that are presently anticipated
are discussed in Part II, Item 5 of this Quarterly Report.

We currently expect that the full year net revenues for 2003 will be somewhat
lower than the revenues of $543.1 million reported in 2002 and that 2003
diluted earnings per share will equal or exceed the $0.53 reported in 2002.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential for loss due to adverse changes in the
fair value of financial instruments. We operate internationally and are subject
to potentially adverse movements in foreign currency exchange rates and
interest rates. These exposures may change over time as our business evolves
and could have an adverse impact on our financial results. We have not entered
into any derivative instruments or hedging contracts to reduce our exposure to
adverse foreign currency rate or interest rate changes. Currently, we receive
non-U.S. dollar denominated revenues and incur non-U.S. dollar denominated
operating expenses in the United Kingdom, India and Canada. We also have assets
located in these countries. The principal currencies creating foreign exchange
rate risk for us are the British pound, Indian rupee and Canadian dollar. For
the three and nine months ended September 30,

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2003, less than 10% of our net revenues and operating expenses were denominated
in non-U.S. dollar currencies. We do not believe that our net income for the
three and nine months ended September 30, 2003 would have been materially
affected if the U.S. dollar had appreciated or depreciated by 10% against the
British pound, the Indian rupee or the Canadian dollar.

Changes in interest rates could impact our anticipated interest income on cash
equivalents and interest expense on variable short-term debt. A 10% adverse
change in interest rates from the interest rates in effect at September 30,
2003 would not, however, have a material adverse effect on our net income for
the three and nine months ended September 30, 2003 or our financial condition
at September 30, 2003.




ITEM 4. CONTROLS AND PROCEDURES

The Companys management, under the supervision and with the participation of
its Chief Executive Officer and Chief Financial Officer, evaluated the
Companys disclosure controls and procedures as of September 30, 2003. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
have concluded that these disclosure controls and procedures are effective.
There have been no significant changes in the internal controls related to
financial reporting that have materially affected, or are reasonably likely to
materially affect these controls.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Reference is made to the discussion of the SEC investigation, the Federal
Securities Actions, the Shareholder Derivative Actions, and the Rosen and
Fresco cases discussed in Note 10 to the Financial Statements included in this
Quarterly Report on Form 10-Q.




ITEM 5. OTHER INFORMATION

RISK FACTORS AND CAUTIONARY STATEMENTS.

When used in this Quarterly Report on Form 10-Q and in future filings by the
Company with the Securities and Exchange Commission, in our press releases,
letters and reports to stockholders and in oral statements made by our
representatives, the words or phrases should result, are expected to,
targeted, will continue, will approximate, is anticipated, estimate,
project or similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are necessarily subject to certain risks and
uncertainties, including those discussed below, which could cause our actual
results to differ materially from our historical experience and our present
expectations or projections. Caution should be taken not to place undue
reliance on any such forward-looking statements, which speak only as of the
date made. The factors listed below could affect our financial performance and
could cause our actual results for future periods to differ from any opinions
or statements expressed with respect thereto. Such differences could be
material and adverse. We will not undertake and specifically decline any
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect events or circumstances occurring
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.

WE ARE UNABLE TO PREDICT THE RESULTS OF THE INVESTIGATION WITH THE SEC AND THE
PENDING STOCKHOLDERS LITIGATION.

We are currently the subject of an investigation by the Securities and Exchange
Commission (SEC). We have been cooperating fully with the SEC staff and intend
to continue to do so. We may, however, become subject to a fine or other
remedies in connection with the investigation. We also have incurred, and may
continue to incur, significant legal expenses in connection with this
investigation.

Our company and our current and former chief executive and chief financial
officers are defendants in three federal securities actions (the Federal
Securities Actions) filed in 2002 in the U.S. District Court for the Eastern
District of Wisconsin (the Wisconsin Federal Court). The complaints in these
actions are substantially identical and allege, among other things, that during
the period from February 2, 2001 to October 24, 2002 the defendants made false
and misleading statements and omissions of material facts and that the
plaintiffs and other members of a putative class of shareholders suffered
damages as a result. In September 2003, the Wisconsin Federal Court appointed a
lead plaintiff and lead counsel in the Federal Securities Actions, consolidated
the three actions and granted defendants motion to transfer the actions to the
U.S. District Court for the District of Arizona (the Arizona Federal Court).
The lead plaintiff is expected to file an amended consolidated complaint in the
Arizona Federal Court and the defendants intend to move to dismiss that
complaint on various grounds

We are also a nominal defendant in two substantially identical shareholder
derivative actions filed in the Superior Court of Arizona, Maricopa County in
January 2003 (the Shareholder Derivative Actions). The complaints allege, among
other things, that certain of our current and former directors named in the
complaints as defendants breached their fiduciary duties to the Company in
connection with certain alleged issues involving the Companys accounting
practices and internal controls. The complaints also name as a defendant the
Companys external auditor. In response to a joint motion by the parties in the
Shareholder Derivative Actions, the court stayed these actions, pending the
resolution of the motions to dismiss the Federal Securities Actions. .

We believe the Federal Securities and Shareholder Derivative Actions are
without merit and intend to vigorously defend ourselves. However, we cannot
predict the outcome of these actions with certainty. We are likely to incur
significant legal expense in connection with the defense of these claims. In
addition, if we are not successful in our efforts to seek dismissal of these
actions, we could incur substantial other expenses.

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ESTIMATES OF FUTURE FINANCIAL RESULTS ARE INHERENTLY UNRELIABLE.

From time to time, our representatives may make public predictions or forecasts
regarding the Companys future results, including estimates regarding future
revenues, expense levels, tax rates, capital expenditures, earnings or earnings
from operations. Any forecast regarding our future performance reflects various
assumptions. These assumptions are subject to significant uncertainties, and,
as a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors, including the
considerations specific to our business that are outlined in this discussion as
well as general economic and geopolitical trends that can adversely affect the
market for our products and services. Many of the factors that can adversely
affect our business are beyond our control. As a result, there can be no
assurance that our performance will be consistent with any management forecasts
or that the variation from such forecasts will not be material and adverse.
Investors are cautioned not to base their entire analysis of our business and
prospects upon isolated predictions, but instead are encouraged to utilize the
entire available mix of historical and forward-looking information made
available by us, and other information relating to our Company and its
products, when evaluating our prospective results of operations.

WE ARE UNABLE TO PREDICT THE RESULTS OF THE PURPORTED CLASS ACTION LAWSUITS
FILED IN FLORIDA.

On June 17, 2003, we were sued in U.S. District Court, Middle District of
Florida, Fort Meyers Division by Russell V. Rosen (Rosen) alleging violations
of the Federal Drivers Privacy Protection Act. The plaintiff alleges that we
purchased motor vehicle records from the State of Florida and used that data
for marketing and other purposes that are not permitted under the Federal law.
The plaintiff is seeking actual damages to be determined or liquidated damages
of not less than $2,500 for each affected member of the purported class, plus
costs and attorneys fees. The plaintiff is also asking for injunctive relief
that would prohibit us from obtaining, disclosing and using personal
information of the plaintiff and other members of the purported class in
violation of the statute. On August 11, 2003, we, and a number of other
defendants, were sued in the U.S. District Court, Southern District, Miami
Division by Richard Fresco based on substantially identical allegations to
those made in the Rosen case. Venue in the Rosen case has now also been
transferred to the Miami District Court. We cannot predict whether the
plaintiffs in these cases will be successful in certifying their complaints as
class actions.

We believe that we have meritorious defenses with regard to the allegations
made in these lawsuits and intend to vigorously defend these actions.
Litigation is, however, by its nature uncertain and an unfavorable resolution
of these lawsuits could materially adversely affect our business, results of
operation or financial condition.

CHANGE IN ACCOUNTANTS.

On October 6, 2003, Deloitte & Touche LLP (Deloitte) advised us and the Audit
Committee of our Board of Directors of its decision not to stand for
re-election as our independent auditors, which resignation would be effective
upon the completion of an engagement to review our interim
consolidated financial statements included in this Quarterly Report. Our Audit Committee is
actively seeking to retain a successor firm to act as our independent
accountants.

If we are not able to retain a successor independent accountant on a timely
basis, we may be unable to complete the filing of our 2003 Annual Report on
Form 10-K before its required filing date. A delay in the filing of our Annual
Report could complicate our future financing efforts and adversely affect the
market for our common stock.

CONSOLIDATION IN THE INDUSTRIES WE SERVE MAY ADVERSELY AFFECT OUR ABILITY TO
SELL OUR PRODUCTS AND SERVICES.

Mergers, acquisitions and personnel changes at financial institutions and
electronic funds transfer networks may adversely affect our business, financial
condition and results of operations. Currently, the banking and EFT industries
are consolidating, causing the number of financial institutions and processing
networks to decline. This consolidation could cause us to lose:



| | - |  | current and potential customers;                                                                                                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | market share if the combined entity determines that it is more
efficient to develop in-house products and services similar to ours or
use our competitors product and services; and
|
| | - |  | revenue if the combined institution is able to negotiate a
greater volume discount for, or discontinue the use of, our products
and services.                                       

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For example, the STAR network was one of the larger processing customers of our
electronic payments business before it was purchased by one of our competitors,
Concord EFS during 2001. First Data Corporation, which owns a substantial
equity interest in the NYCE Network, has now agreed to purchase Concord EFS.
Both the STAR and NYCE networks utilize our electronic funds transfer software.
We cannot predict what effect the combination of these two companies would have
on our business.

OUR EFFORTS TO IMPROVE THE MARGINS OF OUR ATM MANAGEMENT COMPANIES MAY NOT BE
SUCCESSFUL.

During 2001 and 2002, we acquired a number of independent ATM management
companies and we now operate the largest network of off-premise ATMs in North
America. For the nine months ended 2003, this business segment contributed
revenues of $106.4 million, or 26.8% of our total revenues, at an operating
margin of 0.5%. We are not presently seeking to acquire additional ATM
management companies.

Our strategy to improve margins of this business is directed towards providing
an end-to-end ATM management service to financial institutions and retailers
with a particular focus on managing the ATM portfolios of financial
institutions and large retailers. We believe our ability to effectively change
the mix in the business should allow us to improve on the historical returns.
We also expect improvement in our ATM business to come from additional revenues
from branding and other value-added services.

If we are not successful in our effort to improve the revenues and
profitability of our ATM business, our future results of operations will be
adversely affected.

OUR ABILITY TO EXPAND THROUGH ACQUISITIONS INVOLVES RISKS AND MAY NOT BE
SUCCESSFUL.

We are currently considering possible acquisitions to complement and grow our
existing businesses and we have recently acquired the assets of Oasis
Technology, Ltd., a provider of electronic funds transfer processing software.
Our ability to expand through acquisitions involves many risks, including:



| | - |  | the operations, technology and personnel of any acquired
companies may be difficult to integrate;                                                                                                                                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | the allocation of management resources to consummate these
transactions may disrupt our day to day business;                                                                                                                               
|
| | - |  | the acquired businesses may not achieve anticipated revenues,
earnings or cash flow. Such a shortfall could require us to write-down
the goodwill associated with any acquired company, which would
adversely affect our reported earnings.

WE FACE INTENSE COMPETITION IN ALL AREAS OF OUR BUSINESS, AND IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED.

We face intense competition from a number of companies and we expect that
competition will intensify as the movement towards increasing consolidation
within the financial services industry continues. Many of our competitors have
significantly greater financial, technical and marketing resources, greater
name recognition and a larger installed customer base than we do.

In the electronic payments market, our principal competitors include:



| | - |  | third-party debit network processors, including First Data
Corporation, VISA Debit Processing Services, Concord EFS, Midwest
Payment Systems and Fiserv;               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | financial institutions that have developed in-house processing
capabilities or services similar to ours, including Wells Fargo, M&I
Bank and Fifth Third National Bank;
|
| | - |  | electronic funds transfer software providers, including
Transaction System Architects, S2, Mosaic and PaySys.                                                          
|
| | - |  | government service providers including CitiEFS and ACS.                                                                                                                

In the ATM management market, our competitors include Concord EFS, Genpass,
certain ATM equipment manufacturers and numerous independent service
organizations (ISOs).

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In the risk management market, our principal competitors include:



| | - |  | providers of fraud management data and software including Primary
Payment Systems (a subsidiary of Concord EFS), Equifax, Experian,
TransUnion and RiskWise (a division of Lexus-Nexus)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | retail check verification and electronic check processing
providers, including Certegy and Telecheck, a subsidiary of First Data
Corporation.                                          

In the global outsourcing market, our competitors include:



| | - |  | outsourcing solutions companies, including Spectramind/Wipro Ltd,
Daksh and Infosys Technologies.
| | - |  | -------------------------------------------------------------------------------------------------

In the market for electronic transaction processing, the principal factors on
which we compete are price and service levels. Following the loss of our
processing contract with the STAR network, the proportion of our electronic
processing revenues derived from the processing of transactions that originate
from ATMs has substantially increased due to the loss of the POS debit
transactions that were formerly routed through our switch by the STAR network.
The future growth of our revenues in this market is dependent upon securing an
increasing volume of transactions. If we cannot control our transaction
processing expenses, we may not remain price competitive and our revenues will
be adversely affected. Our revenues can also be adversely affected by pricing
concessions, such as those we made in 2003 to retain significant processing
customers. In addition, some of our competitors have indicated that they may be
prepared to provide customer prospects with up-front cash incentives to acquire
or retain their processing business. Given that these competitors have
substantially greater financial resources than we do, it will be difficult for
us to obtain significant new processing customers, or retain the customers we
have, if this approach becomes a significant competitive factor.

We have also seen an effort by processors such as First Data, Concord and VISA
that are affiliated with branded networks to seek exclusive processing
relationships with the debit card-issuing financial institutions who subscribe
to their networks. Ownership or control of a branded network may also enable
these competitors to influence the interchange fees financial institutions
receive from retailers who accept debit transactions from the consumers who
hold debit cards issued by these network participants. We are unable to predict
whether this trend towards an increasing level of vertical integration between
transaction processors and branded debit networks, and the horizontal
integration that could result from the combination of First Data Corporation
and Concord EFS, will have a positive or negative impact upon our processing
business over the long-term. Our software business competes primarily upon the
basis of the quality and reliability of our software and its conformance to the
current and future requirements of our customers. If we do not maintain the
technological relevance of our software offerings or fail to anticipate shifts
in customer requirements, our ability to sell our software products will be
impaired.

In the market for ATM deployment, processing and management services, the
primary basis of competition is industry knowledge and experience, price and
service levels. Our ability to sell additional machines and processing
contracts in this market is dependant on our ability to control our costs while
maintaining effective levels of customer service. If we are not successful in
these efforts we will not achieve the growth objectives we have for our ATM
management or electronic transaction processing businesses.

Competition for our risk management products is based primarily on the quantity
and quality of the data available to us for this purpose and, to a somewhat
lesser degree, price. Our competitive position in these markets could be harmed
if our competitors were able to compile different data sources and analytical
capabilities that proved to be more effective than our products. In addition,
we continue to experience competitive pressure on the pricing for our check
verification service.

Our business process outsourcing and information technology services offerings
compete primarily on the basis of the quality of service levels and, to some
degree, price. The future growth of this aspect of our business is dependent on
demonstrating to our current and prospective customers that we are a dependable
and efficient service provider.

In addition to our current competitors, it is reasonable to expect that we will
encounter substantial competition from new companies. No assurance can be given
that we will be able to compete effectively against current and future
competitors. Increased competition could result in price reductions, reduced
gross margins or loss of market share.

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IF WE EXPERIENCE SYSTEM FAILURES, THE PRODUCTS AND SERVICES WE PROVIDE TO OUR
CUSTOMERS COULD BE DELAYED OR INTERRUPTED, WHICH WOULD HARM OUR BUSINESS AND
REPUTATION AND RESULT IN THE LOSS OF CUSTOMERS.

Our ability to provide reliable service largely depends on the efficient and
uninterrupted operations of our computer and telecommunications network systems
and our data centers. Any significant interruptions could severely harm our
business and reputation and result in a loss of revenue and customers. We could
also be required to apply substantial amounts of our available cash to fund our
settlement obligations and it is possible that we would not have sufficient
resources in the event of a severe and persistent outage. Our systems and
operations could be exposed to damage or interruption from fire, natural
disaster, unlawful acts, power loss, telecommunications failure, unauthorized
entry and computer viruses. Although we have taken steps to prevent system
failures, we cannot be certain that our measures will be successful and that we
will not experience service interruptions. Further, our property and business
interruption insurance may not be adequate to compensate us for all losses or
failures that may occur. We expect to expend significant amounts to upgrade our
business continuity capabilities during the balance of 2003 and the first half
of 2004.

OUR SALES TO DELUXE HAVE BEEN DECLINING.

The revenues we received from Deluxe declined by approximately $11 million
during the first nine months of 2003 from the comparable period in 2002.
Although Deluxe has established minimum spending targets of $43 million per
year through March 31, 2005 for software development and maintenance services
it obtains from us, further efforts at expense reduction by Deluxe could cause
the revenues we receive from Deluxe to continue to decline. We do not expect
that sales to Deluxe in 2003 will reach this minimum target level. The loss of
Deluxe as a customer or a continuing material reduction in the amount of
services it orders from us would materially adversely affect our future results
of operations. Our current contract with Deluxe expires in March 2005. We
cannot predict whether this contract will be renewed or extended after its
scheduled expiration.

LEGISLATION COULD HARM OUR ABILITY TO COLLECT AND USE DATA, INCREASE OUR
OPERATING COSTS OR OTHERWISE HARM OUR BUSINESS.

Existing and new laws and regulations relating to consumer privacy protection
could harm our ability to collect and use consumer data, increase our operating
costs or otherwise harm our business. We collect personal data about consumers
for use in our risk management products. Due to the increasing public concern
over consumer privacy rights, Congress and state legislatures have adopted and
are considering adopting laws and regulations restricting the purchase, sale
and sharing of personal information about consumers. A material increase in the
scope of these types of restrictions could impair the efficacy of our risk
management products.

The federal financial modernization law, known as the Gramm-Leach-Bliley Act,
imposes significant consumer information privacy requirements on any entity
engaged in the business of providing financial services, including entities
that provide services to financial institutions. Federal agencies, such as the
Comptroller of the Currency and the Federal Trade Commission, have issued
regulations to implement these requirements. The Act requires covered companies
to develop and implement policies to protect the security and confidentiality
of consumers nonpublic personal information and to disclose those policies to
consumers before a customer relationship is established and annually
thereafter. In addition, the Act requires covered companies to give an opt-out
notice to consumers before sharing consumer information with third parties. The
opt-out notice requirement in the Act is subject to several exceptions for
credit reporting and fraud prevention purposes. Although we believe these
exceptions apply to our business, government agencies could interpret their
regulations in a manner that could expand the scope of the Act in ways which
could adversely affect our business. In addition, even if the regulations do
not affect us directly, uncertainty over the scope of the regulations could
make financial institutions unwilling or reluctant to share consumer-related
information with us.

The Gramm-Leach-Bliley Act does not prohibit state legislation or regulations
that are more restrictive on our collection and use of data. More restrictive
legislation or regulations have been introduced in the past and could be
introduced in the future in Congress and the states. For example, in the past
legislation has been proposed which would require consumers to opt in to any
plan which would allow their nonpublic personal information to be disclosed. We
are unable to predict whether more restrictive legislation or regulations will
be adopted in the future. Any future legislation or regulations could have a
negative impact on our business.

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The pre-emptive provisions of the Federal Fair Credit Reporting Act,
which governs our SCANSM and ChexSystemsSM products, are currently scheduled to
expire in January 2004. The expiration of these provisions means that state
governments could also seek to issue legislation or regulations in this area.
The creation of additional state regulations could complicate our compliance
efforts and otherwise have a negative impact on our business. The current
Federal Legislation proposed would, if passed, include a permanent pre-emption
and would impose additional procedural and technical compliance requirements
with respect to identity theft and consumer recourse. We believe the Federal
pre-emptive provisions will be continued, but we cannot provide any absolute
assurances that this will be the case. We also cannot predict whether any state
would thereafter seek to implement more stringent requirements if the Federal
provisions are not so continued.

In addition, regulations are currently being considered regarding the
application of the Americans with Disabilities Act to ATM networks. Although
any regulations could result in increased opportunities for ATM sales by us,
they could also require us to retire or retrofit portions of the ATM base we
own and could motivate some of our customers to elect to retire their ATMs. It
is also possible that existing ATM networks will be exempted from any future
regulations. We are unable at this time to determine whether, and to what
extent, any final regulations will impact our business.

IF THE SECURITY OF OUR DATABASES IS COMPROMISED, OUR REPUTATION COULD SUFFER
AND CUSTOMERS MAY NOT BE WILLING TO USE OUR PRODUCTS AND SERVICES.

If the security of our databases is compromised, our business could be
materially adversely affected. In our electronic payments and risk management
businesses, we collect personal consumer data, such as names and addresses,
social security numbers, drivers license numbers, checking and savings account
numbers and payment history records. Unauthorized access to our database could
result in the theft or publication of personal confidential information and the
deletion or modification of personal records or otherwise cause interruptions
in our operations. These concerns about security are increased when we transmit
information overseas or over the Internet. A security or privacy breach may:



| | - |  | deter customers from using our products and services;                          
| | - |  | -------------------------------------------------------------------------------
|
| | - |  | harm our reputation;                                                           
|
| | - |  | expose us to liability;                                                        
|
| | - |  | increase our operating expenses to remediate problems caused by the breach; and
|
| | - |  | decrease market acceptance of electronic commerce transactions in general.     

WE MAY EXPERIENCE SOFTWARE DEFECTS, DEVELOPMENT DELAYS AND INSTALLATION
DIFFICULTIES, WHICH WOULD HARM OUR BUSINESS AND REPUTATION AND EXPOSE US TO
POTENTIAL LIABILITY.

Our services and products are based on sophisticated software and computing
systems and we often encounter delays when developing new products and
services. Further, the software underlying our products and services has
occasionally contained and may in the future contain undetected errors or
defects when first introduced or when new versions are released. In addition,
we may experience difficulties in installing or integrating our products and
technologies on platforms used by our customers or in new environments, such as
the Internet. Our acquisition of Oasis will increase our exposure to these
risks somewhat. Defects in our software products, errors or delays in the
processing of electronic transactions or other difficulties could result in:



| | - |  | delays in market acceptance;               
| | - |  | -------------------------------------------
|
| | - |  | additional development costs;              
|
| | - |  | diversion of technical and other resources;
|
| | - |  | loss of customers;                         
|
| | - |  | negative publicity; or                     
|
| | - |  | exposure to liability claims.              

Although we attempt to limit our potential liability for warranty claims
through disclaimers and limitation-of-liability provisions in our license and
client agreements, we cannot be certain that these measures will be successful
in limiting our liability.

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THERE ARE A NUMBER OF RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES AND
OPERATIONS THAT COULD HARM OUR BUSINESS.

Because we currently sell some of our products and services in Europe,
Australia and Canada and provide outsourcing services from India, our business
is subject to risks associated with doing business internationally. For the
nine month period ended September 30, 2003, we generated approximately 9.2% of
our net sales outside of the United States. The acquisition of Oasis will
increase the proportion of our revenues derived from foreign jurisdictions. Our
future results could be harmed by a variety of factors, including:



| | - |  | changes in foreign currency exchange rates;                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| | - |  | changes in a specific countrys or regions political and
economic conditions, particularly in emerging markets;
|
| | - |  | potentially unfavorable tax rules;                                                                              
|
| | - |  | tariffs, duties and other trade barriers;                                                                       
|
| | - |  | reduced protection for intellectual property rights;                                                            
|
| | - |  | challenges in managing widespread operations;                                                                   
|
| | - |  | changes in foreign laws and regulatory requirements or in foreign policy; and                                   
|
| | - |  | varying business practices in foreign countries.                                                                

In addition, the process of selling our outsourcing services typically involves
visits to our sites in India by prospective customers. Increased levels of
international tension can result in prospective clients postponing or canceling
plans to visit our facilities, lengthening the sales cycle and otherwise
inhibiting our ability to grow this business. Political opposition to the use
of offshore resources such as our India-based operations and domestic security
concerns that can make it more difficult for foreign nationals to obtain U.S.
visas can potentially have a similar effect.

CHANGES IN INDIAN TAX LAWS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our Indian software development and business process management operations
qualify for tax incentives associated with businesses that operate within
designated geographic locations. These incentives generally provide us with
exemptions from Indian tax on certain business income generated from these
operations and phase out through March 2009. We cannot assure you that these
tax benefits will be continued in the future at their current levels or at all.
If our Indian tax benefits are reduced or eliminated, our taxes in future
periods would increase. Such an increase could reduce our profits.

WE FACE TERMINATION AND COMPLIANCE RISKS WITH RESPECT TO OUR GOVERNMENT
CONTRACTS.

All of our government contracts can be terminated at any time, without cause,
by the contracting governmental entity. We realized approximately 8.8% of our
net sales in the first nine months of 2003 (before reimbursed expenses)
pursuant to contracts of this type. If a government contract is so terminated,
we are generally entitled only to receive compensation for the services
provided or costs incurred at the time of termination and a reasonable profit
on the contract work performed prior to the date of termination. In addition,
all of our government contracts require us to comply with various contract
provisions and procurement regulations, and in some cases, accounting
requirements. Violations of some of these provisions could, if not cured,
result in termination of the contract and fines.

There will be a decline in the revenues of the government services business in
2003 as compared to 2002 due to the expiration of existing contracts. Our
Medicaid eligibility verification contract with the state of New York expired
in December 2002. The approximate annual revenue from this contract was $12
million. An EBT contract that generated approximately $4 million in revenue in
2002 also expired at the end of 2002. Although we have obtained and continue to
seek additional EBT contracts, these new contracts will not generate sufficient
revenues in 2003 to offset the approximately $16 million decline in revenues we
will experience due to the contract expirations described above.

In addition, Citibank has been awarded the EBT contract for the Western States
EBT Alliance (Arizona, Alaska, Colorado, Guam, Hawaii, Idaho and Washington).
We currently act as a subcontractor to Citibank for this alliance and this
relationship generated approximately $4 million in revenues for the first nine
months of 2003 (excluding revenues derived from reimbursed expenses). We expect
that, as a result of Citibank being awarded this EBT

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contract, our role as a subcontractor will be discontinued. This transition
will begin to impact our business in 2003 and we expect to see the significant
contracts for this coalition largely roll-off by the end of 2004.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.

Despite our efforts to protect our intellectual property rights, third parties
may infringe or misappropriate our intellectual property rights, or otherwise
independently develop substantially equivalent products and services. The loss
of intellectual property protection or the inability to secure or enforce
intellectual property protection could harm our business and ability to
compete. We rely on a combination of trademark and copyright laws, trade secret
protection and confidentiality and license agreements to protect our
trademarks, software and know-how. We have also applied for patent protection
on some of the features of our newer products. We may be required to spend
significant resources to protect our trade secrets and monitor and police our
intellectual property rights.

Third parties may assert infringement claims against us in the future. In
particular, there has been a substantial increase in the issuance of business
process patents, which may have broad commercial implications. Claims for
infringement of all types of patents are becoming an increasing source of
litigation. If we become subject to an infringement claim, we may be required
to modify our products, services and technologies or obtain a license to permit
our continued use of those rights. We may not be able to do either of these
things in a timely manner or upon reasonable terms and conditions. Failure to
do so could seriously harm our business and operating results. In addition,
future litigation relating to infringement claims could result in substantial
costs to us and a diversion of management resources. Adverse determinations in
any litigation or proceeding could also subject us to significant liabilities
and could prevent us from using some of our products, services or technologies.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT A
CHANGE IN CONTROL.

Provisions of our certificate of incorporation and bylaws and Delaware law may
delay or prevent a change in control of our Company that you may consider
favorable. These provisions include the following:



| | - |  | no cumulative voting by stockholders for directors;                                                                                                                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | a classified board of directors with three-year staggered terms;                                                                                                                                                                
|
| | - |  | the ability of our board to set the size of the board of
directors, to create new directorships and to fill vacancies;                                                                                                          
|
| | - |  | the ability of our board to issue preferred stock, without
stockholder approval, with rights and preferences that may be superior
to our common stock;                                                                          
|
| | - |  | the ability of our board to amend our bylaws;                                                                                                                                                                                   
|
| | - |  | a prohibition of stockholder action by written consent;                                                                                                                                                                         
|
| | - |  | advance notice requirements for stockholder proposals and for nominating candidates to our board;                                                                                                                               
|
| | - |  | restrictions under Delaware law on mergers and other business
combinations between us and any holder of 15% or more of our
outstanding common stock;                                                                            
|
| | - |  | a requirement that 66-2/3% of our stockholders and 66-2/3% of our
directors approve certain corporate transactions, including mergers
and consolidations, sales of assets or amendments to our certificate
of incorporation; and
|
| | - |  | we have adopted a stockholder rights plan, which discourages the
unauthorized acquisition of 15% or more of our common stock or an
unauthorized exchange or tender offer.                                                       

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed as part of this report:

|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------
|Exhibit |  |                                                                                                                                                                                                                                                                                     |  |                 
|No.     |  | Description                                                                                                                                                                                                                                                                         |  | Method of filing
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|3.1     |  | Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-1
(the S-1) filed by the Company with the Securities and Exchange
Commission (the Commission) on April 4, 2000, Registration No.
333-33992) |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|3.2     |  | Bylaws (incorporated by reference to Exhibit 3.2 to the S-1)                                                                                                                                                                                                                        |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|4.1     |  | Form of common stock certificate (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the S-1 filed by the Company with the
Commission on May 15, 2000 (Amendment No. 1), Registration No.
333-33992)                                                                  |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|4.2     |  | Form of Rights Agreement by and between the Company and Rights Agent,
(incorporated by reference to Exhibit 4.2 to Amendment No. 1)                                                                                                                                                 |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|4.3     |  | Certificate of Designation of Series A Participating Preferred Stock
(incorporated by reference to Exhibit 4.3 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000)                                                                                  |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.1    |  | Executive Separation Agreement, dated as of August 22, 2003, by and
between the Company and Colleen M. Adstedt                                                                                                                                                                      |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.2    |  | Schedule identifying additional Transition Assistance Agreements
omitted pursuant to Instruction 2 to Item 601 of Regulation S-K                                                                                                                                                    |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.3    |  | Schedule identifying additional Change in Control Agreements omitted
pursuant to Instruction 2 to Item 601 of Regulation S-K                                                                                                                                                        |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|31.1    |  | Section 302 Certification by Mr. Paul F. Walsh                                                                                                                                                                                                                                      |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|31.2    |  | Section 302 Certification by Mr. Thomas S. Liston                                                                                                                                                                                                                                   |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|32.1    |  | Section 906 Certification by Mr. Paul F. Walsh and Mr. Thomas S. Liston                                                                                                                                                                                                             |  | Filed herewith  

*Incorporated by reference

(b) Reports on Form 8-K

On July 30, 2003, the Company furnished a report on Form 8-K which included,
pursuant to Items 7 and 9 of that form, a press release announcing the
Companys second quarter 2003 financial results. This press release included
the Companys condensed consolidated balance sheets at June 30, 2003 and
December 31, 2002, and its condensed consolidated statements of operations and
cash flows for the three and six months ended June 30, 2003 and June 30, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                        |  |                                                   
|----------------------- |  | --------------------------------------------------
|                        |  | eFunds Corporation
(Registrant)                   
|                        |  |                                                   
|Date: November 14, 2003 |  | /s/ Paul F. Walsh                                 
|                        |  |                                                   
|                        |  | Paul F. Walsh
Chief Executive Officer and Chairman
|                        |  |                                                   
|Date: November 14, 2003 |  | /s/ Thomas S. Liston                              
|                        |  |                                                   
|                        |  | Thomas S. Liston
Chief Financial Officer          

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Index to Exhibits

|        |  |                                                                                                                                  |  |             |  | 
|------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | 
|Exhibit |  |                                                                                                                                  |  |             |  | 
|No.     |  | Description                                                                                                                      |  | Page Number
|        |  |                                                                                                                                  |  |            
|10.1    |  | Executive Separation Agreement, dated as of August 22, 2003, by and
between the Company and Colleen M. Adstedt                  
|        |  |                                                                                                                                 
|10.2    |  | Schedule identifying additional Transition Assistance Agreements
omitted pursuant to Instruction 2 to Item 601 of Regulation S-K
|        |  |                                                                                                                                 
|10.3    |  | Schedule identifying additional Change in Control Agreements omitted
pursuant to Instruction 2 to Item 601 of Regulation S-K    
|        |  |                                                                                                                                 
|31.1    |  | Section 302 Certification by Mr. Paul F. Walsh                                                                                  
|        |  |                                                                                                                                 
|31.2    |  | Section 302 Certification by Mr. Thomas S. Liston                                                                               
|        |  |                                                                                                                                 
|32.1    |  | Section 906 Certification by Mr. Paul F. Walsh and Mr. Thomas S. Liston                                                         

33